Environmental accounting in Fiji

An extended case study of the Fiji Sugar Corporation

Sumit K Lodhia

Abstract
This paper argues that accountants have the potential to play a crucial role in environmental
management and reporting, through their managerial, performance measurement and evaluation,
auditing and reporting skills. An in-depth study is undertaken to review the environmental
accounting practice of the only public company in Fiji that discloses environmental information
in its corporate annual report. The results indicate that environmental accounting in the Fiji
Sugar Corporation (FSC) focuses on legitimising the environmentally sensitive nature of the
companys operations rather than being an attempt to extend stewardship to the stakeholders that
may be affected by the companys operations. There is also evidence of only limited involvement
of accountants in the environmental management strategies of the FSC. The findings suggest that
voluntary attempts at environmental accounting may not necessarily lead to an improvement in
the quality of life for everyone. Hence, it is envisaged that the accountants skills can be utilised
more effectively in environmental matters if appropriate legislation and standards are used to
provide a regulatory framework for environmental accounting.
Introduction
Environmental issues have gained significance in recent years through the dissemination of
information on the potentially harmful effects of industrial activities on our environment. Major
environmental degradation incidents to date1 point to the need to place controls on commercial
activities and to encourage sustainable business practices. This is vital for the South Pacific Island
communities, which have been plagued by a range of environmental problems culminating in sealevel rise and unexpected climatic change in the islands (see for example Nunn 1999). South
Pacific countries have also been used as a testing ground for nuclear activities and a dumping
ground for foreign toxic wastes. The Moruroa Atoll in French Polynesia, for example, has served
as a testing ground for the French governments nuclear development programme and both
Britain and the USA are also guilty of this particular form of experimentation in the past. As
Nandan observes:

Cash payments for accepting foreign wastes are generally large enough to tempt
developing nations to mortgage their public health and environmental integrity. (1993: 7)
Pressing environmental issues in the South Pacificnot all of them endogenousinclude global
warming, atmospheric, soil and water pollution caused by industrial activity, inadequate waste
management, urban sprawl, vehicle exhaust fumes, deforestation, soil degradation, excessive
noise pollution, marine pollution, and the dumping of hazardous nuclear and toxic waste into the
seas and rivers by industrialised nations (as well as careless and dangerous waste disposal by
operations within the island countries).2 These issues are also critical in Fiji and in recent years
growing public awareness has resulted in closer scrutiny of the activities of the major industries
that may be contributing to environmental degradation.
The constant oil spillages in Suvas major industrial area, Walu Bay (see for example Fiji Times,
19 April 1998; Fiji Sun, 2 Feb. 2000; Sunday Sun, 5 March 2000) and the Qawa River saga (see
for example Fiji Times, 28 Sept. 1998) have provoked vehement and committed
environmentalists to urge strongly in the media the need for appropriate environmental legislation
in Fiji. To date, the parties allegedly responsible for the Walu Bay spills have not faced
prosecution. At the same time, there is continual outrage at the excessive discharge of pollutants
by the Fiji Sugar Corporation (FSC) into the Qawa River in Labasa. These events have
highlighted the need for an environment bill for Fiji that could punish such offenders and
indeed, some time after this research was carried out, the passage of the Sustainable Development
Bill in the foreseeable future was announced.
Over a year ago, a South Pacific Regional Environmental Program (SPREP) report indicated that
Fiji rates as one of the worst South Pacific countries in terms of chemical pollution (Daily Post,
29 Jan. 1999). Industrialisation has had an adverse impact on the seas, rivers and soils of Fiji, and
already there are stockpiles of poisonous waste and obsolete pesticides, herbicides and solvents.
However, on a more positive note, the report recorded approvingly that Fiji is included in a longterm clean-up plan, initiated by the SPREP, that will give help to countries in the form of plans,
methods and training in the safe storage or disposal of dangerous chemicals.
This brief overview is sufficient to suggest that the pursuit of economic growth and
industrialisation should not be at the expense of the environment and that environmental
protection is essential for South Pacific Island nations such as Fiji. Development needs to be

sustainable,3 which implies that business activities and consideration of the environment should
not operate in isolation from each other. It is in this area that the leading players in business
activity, most of them people with an accounting background,4 have the potential to contribute
towards environmental protection and enhancement.
This paper is structured as follows. Having established the seriousness of environmental problems
for South Pacific Island nations such as Fiji, it proceeds in the next section to suggest ways in
which accounting practice, through the mechanism commonly referred to as environmental
accounting, can contribute to heightened environmental consciousness. The role accountants can
play, through environmental management and environmental reporting, is discussed. Prior studies
of social and environmental accounting in Fiji are reviewed before the present empirical study,
focusing on the Fiji Sugar Corporation, is presented. An analysis of the FSCs environmental
accounting practice is followed by recommendations for improving the companys present
practice. Lastly, the findings of the research are summarised and appropriate conclusions are
formulated.
What is environmental accounting?
Environmental accounting, which is a vital component of Social and Environmental Accounting
(SEA),5 is believed to be accountants particular contribution towards preserving the integrity of
the environment. Environmental accounting, write Gray and co-authors,
can be taken as covering all areas of accounting that may be affected by the business
response to environmental issues, including new areas of eco-accounting. (Gray,
Bebbington & Walters 1993: 6)
Similarly, Burritt and Lehman state that:
Environmental accounting is the generic name given to the field of study highlighting the
interrelationships between accounting, accountants, and the ecological. (1995: 16970)
Environmental accounting involves the establishment of environmental management systems
within organisations so that environmental issues can be addressed within the conventional
practice. Further, these internal accounting systems need to be transformed into the reporting of

environmental information, primarily in the corporate annual reports. This will make the firm
accountable for its environmental performance in addition to its financial results. The components
of environmental accounting are set out in figure 1. This paper will study and evaluate the
environmental accounting practices of the FSC in terms of both the environmental management
and environmental reporting mechanisms. An attempt will also be made to determine the role of
accountants in these mechanisms.
Figure 1 Elements of environmental accounting

What constitutes environmental accounting?

Environmental Management

Internalisation of environmental costs

Environmental risk assessment and estimation

Investment appraisal to include consideration of the environment

Establishment of environmental management systems

Environmental Reporting

Disclosure of environmental information in corporate annual reports

Disclosure of environmental information in other communication media such as

environmental reports

For the purposes of this study, the development of environmental accounting is visualised in three
stages (refer to figure 2). In the first stage, the organisation establishes an environmental policy,
which is essentially a document outlining a set of objectives or targets that the environmental
strategies adopted are intended to achieve. This policy is used to determine the organisations
responsibility to the environment. Tilt (1997) suggests that characteristic features of an
environmental policy include a statement of objectives, commitment to sustainable development,
details of involvement of staff in development and review, a record of the allocation of specific
funds and the integration of the environmental policy with other policies.

[Fig. 2 about here]

The next stage consists of the mapping out of the environmental plans and structures by which the
organisation aims to meet the objectives of the environmental policy. All resulting environmental
control activities are based on these plans and structures, and an environmental audit is often an
integral part of this activity. This process involves the execution of environmental policies and
includes all financial and non-financial activities that accountants may undertake in appreciation
of the environment. Environmentalists may also be involved during this stage.
The final stage involves the recording and reporting of the results of the environmental control
activities carried out in the second stage. This would involve incorporating environmental issues
into mainstream accounting. The disclosure of the environmental accounting practice may occur
in the annual reports or in separate environmental reports.

Figure 2 The development of environmental accounting

Establishment of
environmental
policy

Environmental plans,
structures and control
activities

Recording and
reporting of
environmental control
activities

The role of accountants in environmental accounting

The very existence of the term environmental accounting implies that accountants can have a
consequential role in environmental issues. Business activities in general contribute to
environmental degradation, and manufacturing industries more especially so. Thus it is suggested
that businesses themselves should play a major part in reducing environmental degradation.
Businesses need performance indicators to analyse the results of activities and the accounting
process is a mechanism that they can use effectively to measure such performance.
The accountants role in handling environmental issues is envisaged through their managerial
skills, particularly those associated with performance measurement and evaluation, auditing and

reporting. Accountants play a key role in the management accounting systems within their
organisations, for they are continually involved in providing information for planning, control and
decision making (Langfield-Smith, Thorne & Hilton 1998). These skills are essential for
environmental management within an organisation and it is here that the role of accountants
comes to prominence. Accountants hold positions of key responsibility and authority within an
organisation and it is hoped that they will encourage sustainable business practices within their
respective organisations. Further, accounting processes allow the performance measurement and
evaluation of an enterprise. Presently, this measurement is restricted to financial numbers but
there is no reason to believe that the social and environmental performance of an organisation
cannot be easily measured by accounting itself.
On the other hand, the art of auditing within the accountancy profession enshrines an
independent attestation of the performance of a company (Gul et al. 1995). Accountants
particular skills could be utilised in environmental audits, or in seeking an independent evaluation
of the environmental performance of a company. Finally, the ability of the audited reporting
mechanisms employed by the accountancy profession to extend accountability to the numerous
stakeholders constitutes another remarkable trait of the profession. As mentioned earlier, this
form of accountability is presently skewed towards the financial performance of an entity.
However, it is hoped that in the future, social and environmental disclosures will become more
common complements to financial disclosures in the corporate annual reports in order to provide
a broader stewardship function to the stakeholders.
The literature on environmental accounting suggests that the role played by accountants in
environmental accounting is twofold (see for example Owen 1992, 1993; Gray, Bebbington &
Walters 1993; Medley 1997; Wilmshurst & Frost 1998; Lodhia 1998). First, their involvement in
the internal operation of environmental management systems should lead to attempts to
incorporate environmental issues into conventional accounting practice. Secondly, accountants
would be the major contributors to the disclosure of environmental information in annual reports
or in some other medium of communication.
Environmental management
The cost accounting, financial management, risk assessment and information system components
of conventional accounting all need to incorporate environmental accounting (Corrigan 1998).6

Cost accounting systems would need to trace environmental costs in addition to the conventional
costs and attempt to internalise these costs (Gray, Bebbington & Walters 1993; Corrigan 1998).
There would, it is true, be a degree of subjectivity associated with this process but this need not
be an insuperable problem: conventional practice has in the past managed to handle successfully a
number of other subjective issues in accounting. The financial management components of
accounting systems, on the other hand, would need, as part of their appraisal of investment
projects, to consider the environmental impact of business operations (Gray, Bebbington &
Walters 1993; Corrigan 1998; Gray et al. 1998).
The risk assessment procedures within an organisation should be able to detect, estimate and
minimise environmental risks. For instance, environmental audits could be undertaken to
determine the environmental impact of the operations of a company (Power 1997). There may
also be a need to create provisions for environmental risk and contingent liabilities, in order to
forecast the adverse consequences of the business activities of the organisation (see Love Canal
Tragedy, in Tinker 1985). Auditors could, through their risk assessment models, play an
instrumental role in detecting environmental violations. Lastly, environmental management
systems could be established within conventional accounting information systems to handle
environmental matters (Gray, Bebbington & Walters 1993; Medley 1997; Corrigan 1998). The
skills of accountants in establishing information systems to support organisational activity could
be utilised in the development of environmental management systems. Such systems could see
the pooling of expertise from various disciplines, such as accounting and science, for the purpose
of assessing environmental issues of significance to the organisation and recommending
associated remedial actions.
This paper examines the environmental management strategies of the Fiji Sugar Corporation in
terms of the components identified in this section. Through such internal mechanisms
organisations are able to collate environmental information for disclosure in the corporate annual
reports.
Environmental reporting
To provide accountability to stakeholders on the companys environmental performance,
environmental management systems need to be complemented by disclosure of environmental
information. This is commonly referred to as environmental reporting and is concerned with

signalling to stakeholders how the companys activities relate to the environment in terms of its
consumption of energy and raw materials; its business activities and operations; and its wastes,
products and by-products (Fayers 1998).
The annual report has been used in the past as a prime medium giving expression to an
organisations accountability to the society (see for example Cooper & Sherer 1984) as well as a
medium of communication for portraying environmental information. However, other means are
also available, including published environmental reports or even separate booklets. Brochures
and advertisements may also suffice in disclosing environmental information (Zehgal & Ahmed
1990).
At its more comprehensive level, environmental reporting involves producing environmental
reports that provide details of environmental policies, objectives, management, performance and
the impact of a companys operations on the environment (Tremaine 1997). Such a report would
need to identify the legislative compliance, a list of any contaminated sites, information about
discharges to air, water and land, carbon dioxide emissions, resource efficiency targets, and
information on the cost of pollution abatement or remediation (ibid.). Unfortunately, as
environmental reporting is presently voluntary, these reports are not disclosed to the stakeholders;
accountability for the impact of an organisations activities on the environment is not extended to
the (society-wide) public.
Environmental accounting practice in the Fiji Sugar Corporation
A case study
Prior studies in Fiji
The only literature on social and environmental accounting in Fiji is that produced by Nandan
(1992, 1993). His 1992 work, a major empirical study of local SEA practice, involved a content
analysis of the annual reports of the listed companies in Fiji, followed by interviews with
practising accountants and corporate managers. His findings highlighted the fact that
environmental reporting was in fact non-existent in the annual reports of the major public
companies in Fiji in the period under examination (19881990). He further pointed out that at
least at that time, those disclosures that were made in the local corporate annual reports were not
broadened to include social issues. Mere compliance with the statutory requirements seemed to be

the single goal. One of the major public companies studied in that empirical analysis was the Fiji
Sugar Corporation.
Another significant finding of Nandans study was that accountants were also largely unaware of
their potential to make a contribution on social and environmental issues. In the interviews, the
accountants and corporate managers pointed strongly to the need for the regulation of SEA
practice, calling for an increased involvement on the part of the Fiji Institute of Accountants
(FIA). However, the interviewees believed that changes in mainstream accounting brought about
by the incorporation of social issues into the conventional practice were inevitable, largely due to
the popularity of the concept of corporate social responsibility. Nandan concludes:
the sooner we sweep away the mystifications and false images of bookkeepers and
technicians to reveal the true social significance of accounting, the better it is for all of us.
(1992: 146)

Research methods
An analysis of the recent (1998) corporate annual reports of listed local companies indicated the
FSC as the only public company in Fiji that discloses environmental information in its corporate
annual report. At first sight, this made the company a good candidate for an in-depth analysis of
its environmental accounting strategies. Nevertheless, in terms of documents, this study of FSCs
environmental reporting practice has had to restrict itself to the companys corporate annual
reports: attempts to gain access to the companys environmental reports proved futile and the
company does not disclose its environmental performance through other communication media.
In addition, semi-structured interviews and discussions were held with a senior accountant
(Interviewee A) and a senior environmental management staff member at the FSC (Interviewee
B). Informal discussions and unstructured interviews were also held with some of the other
accountants and environmental management personnel at the company. A longitudinal content
analysis of the FSCs corporate annual reports and an analysis of newspaper articles depicting
aspects of its environmental performance supplemented these interviews. Thus although the
companys refusal to allow access to environmental policy documents imposed some limitations

on the research, it was felt that there was sufficient information available from the interviews and
annual reports to make some evaluation of the FSCs environmental accounting practice.
The company
The FSC was established by an Act of Parliament in 1972 and began operations in 1973. Its
shareholders range from the government to statutory bodies, local public companies and
individuals. The corporation has the sole responsibility for the manufacture of sugar in Fiji. It
owns and manages the countrys four mills, the Lautoka, Labasa, Rarawai and Penang sugar
mills.
The FSCs annual report indicates that it is the largest private sector employer in Fiji. The
corporation is predominately managed and staffed by Fiji citizens. Its subsidiary companies
include FSC Projects Limited, South Pacific Fertilisers Limited, Agchem Limited and (in
Australia) FSC Services Proprietary Limited.
The primary product of the company is sugar; the by-products include bagasse, mill mud and
molasses. The corporation makes good use of its by-products. The use of bagasse as the major
source of fuel in the sugar manufacturing process minimises the dependence on fossil fuels. Mill
mud, which is of no further use in production, is distributed to farmers for use as fertiliser and
molasses is sold commercially.
Environmental impact of the companys operations
Manufacturing activities almost invariably have an impact on the environment and the
corporations sugar manufacturing operation is no exception. Unfortunate by-products include
air pollution, water pollution, noise pollution, dust emissions, the disposal of hazardous chemicals
used in production, and the environmental risks associated with the storage of bagasse, the
primary source of fuel for production.
Discharges to the air as a result of the manufacturing process are a common sight in the FSCs
four mills. Usually, particle matter from production accompanies smoke emissions. The
corporation believes that its modern boilers capture the bulk of particle matter, allowing only
extremely low volumes of it to be discharged into the air. In spite of this, breakdowns or failures

10

in boilers may result in unexpected amounts of particle matter being discharged, with far-reaching
effects on the environment.
The manufacturing process may also cause water pollution. All four mills are of necessity
situated close to a water source. Large volumes of water are extracted from nearby rivers into the
factory to condense the vapour used in the production process, at the completion of which the
liquid waste matter from production is discharged back into the rivers. The corporation has
effluent digestion treatment ponds in the Rarawai, Labasa and Penang mills. Any spillover from
the production process, and pollutants that may be generated from manufacturing, are directed to
these effluent treatment ponds, where they undergo biodegradation. Unfortunately, the Lautoka
mill had no suitable land for the development of such ponds so the practice there is to discharge
wastes into the deep sea. It is believed that because the mixing effect is greater in the deep sea
than in the shallower waters of the foreshore, the impact on marine life is minimal.
A related area of concern for the company is the excessive dust that may be generated when
bagasse is transported to the conveyor during manufacturing. The corporation seeks to minimise
this problem by covering the bagasse with tarpaulin and aprons.
Noise pollution is another result of the manufacturing process and to counteract this the
corporation provides protective gear to employees as part of its occupational health and safety
measures. Cause for greater concern is the use of hazardous chemicals such as lead in the
production process, albeit in extremely small quantities. These substances are disposed of in pits
that are dug around unused and protected land areas. Finally, bagasse is stored close to the mills
for future use in production. Disasters could occur should a fire start, while strong winds and rain
could also cause dust emissions.
Environmental accounting system
Although the FSCs environmental accounting practice is still at a fairly rudimentary stage, the
proposed introduction of the Sustainable Development Bill in Fiji makes development and
refinement of the practice inevitable.
The FSC uses environmental accounting as a mechanism for demonstrating its accountability to
its shareholders in order to legitimise its operations and to improve its public image. As one

11

would expect of the primary shareholder in the FSC, the government tries to ensure that the
companys operations are environmentally sensitive and to seek assurance that company
objectives are not contradictory to its own policies on sustainable development. Therefore, the
FSC uses environmental accounting to enhance its stewardship role to government. Recently,
following the (1999) election of the Peoples Coalition government in Fiji, the Prime Minister
declared that the company would no longer discharge its waste products into the seas and rivers
(Fiji Times, 24 June 1999). Whether and how this goal can be achieved remains to be seen.
The company has also developed its environmental accounting programme in an attempt to avoid
unforeseen contingencies in the future: minimising the environmental impact of its operations
now seems preferable to doing nothing and incurring excessive fines and damages in the future.
The FSC has established an environmental policy to provide objectives for the management of the
environment. However, for unstated reasons, this policy is confidential and external parties
(including the researcher) cannot have access to its contents. It is understood that the
environmental policy establishes appropriate guidelines for the monitoring of activities that have
an impact on the environment. The corporation carries out regular environmental audits and in the
past, consultant firms such as Kingston Morrison and Patrick Charles Proprietary Limited were
engaged to undertake such exercises.
Upon the completion of the environmental audit, an environmental report is produced. This
report, which is not disclosed to external parties, even if they are stakeholders, indicates to
management the impact of the corporations activities on the environment.
On the basis of the environmental report, corrective measures are taken to minimise adverse
effects on the environment. This quite often involves capital expenditure through investment in
pollution control equipment such as effluent control systems. The FSCs capital expenditure in
environmental management for the period 19911997, totalling F$1,537,993, was spread across
all four mills and concentrated heavily on the problem of effluent control (see tables 1a and b).
[Tables 1a and b about here]
The final stage of the FSCs environmental accounting process includes accounting for and
reporting on environmental control activities. The capital expenditure incurred in environmental

12

management is accounted for through conventional accounting principles. The annual report is
used as the public face, the medium for reporting to external parties. Environmental policies and
reports, on the other hand, are kept strictly for internal management only.
Table 1a FSC investment in environmental management, 19911997
Year

Description

Mill

Amount
(F$)

1991

Pollution control system - Stage 1

Rarawai

100,000

Effluent control system - Stage 2

Penang

121,700

1992

Nil

1993

Effluent treatment upgrade study

Rarawai

15,000

1994

Feasibility study on effluent control

Lautoka

60,000

Upgrade effluent control system

Rarawai

261,772

Upgrade effluent control system

Labasa

366,070

Upgrade effluent control dystem (supp.)

Labasa

60,000

1995

Ph controls for effluent control systems

Rarawai

33,555

1996

Upgrade primary effluent pond

Rarawai

100,000

Upgrade effluent control system (supp.)

Labasa

12,500

Upgrade effluent control system

Lautoka

292,550

Compressor for pollution pond aeration

Penang

58, 668

Fence effluent ponds

Penang

5,483

Replace 2 pollution pumps

Penang

37,568

Divert ater to pond

Penang

13,127

1997

Table 1b FSC investment in environmental management, 19911997, by mill, (F$)

Year
1991
1992
1993
1994
1995
1996
1997
Total

Rarawai
100,000
15,000
261,772
33,555
100,000
510,327

Lautoka
60,000
292,550
352,550

Labasa
426,070
12,500
438,570

Penang
121,700
58,668
56,178
236,546

Total
221,700
15,000
747,842
33,555
463,178
56,178
1,537,993

13

The role of accountants

The extent to which accountants are involved in the FSCs environmental management strategies
provides empirical support for the claim that there is in general only limited involvement of
accountants in environmental management at present. The literature on environmental accounting
suggests that accountants in general are largely unaware of their potential for making a
contribution to promoting environmental sensitivity in organisations (see for example Gray et al.
1995). There is a tendency to rely too heavily on the conventional accounting framework and to
disregard social and environmental issues of significance to the organisation. The FSCs
environmental accounting practice is certainly reflective of such observations.
An examination of the FSCs environmental management systems suggests that accountants are
not in any way involved in the establishment of an environmental policy and the mapping out of
plans and structures on the basis of such policies to meet environmental objectives. Neither are
they involved in the implementation of environmental control activities; these are undertaken by
the production department of the corporation. The accountants involvement is much more
limited. Through conventional accounting practices they account for expenditure on capital
investments attributed to environmental protection. Some consideration is given to environmental
factors when accountants appraise investment projects and they also report on the environmental
control activities of the company in annual reports.
In summary, in terms of environmental accounting, the primary involvement of FSC accountants
is in the disclosure of environmental information in annual reports. Their role in the internal
operations of the environmental management systems is insignificant. Accountants do not
monitor the evolution of the green agenda, nor do they contribute to environmental programmes.
Environmental management
Accountants in the FSC do not attempt to trace environmental costs and incorporate them within
conventional costs. Further, even though they indicated in the interviews that they take
environmental risks and contingencies into account, to date the companys annual reports have
incorporated neither environmental costs nor environmental provisions and contingent liabilities.
In addition, the interviewees stated that although they did consider environmental factors when
appraising investment projects, these were given a low priority. Their investment appraisal forms
have a section titled Other Factors relevant to the investment and generally this could include

14

environmental factors. Finally, the company does not have a formal environmental management
system that would look at ways of reducing the environmental impact of their business operations
or conduct regular environmental audits.
The accountants interviewed mentioned that they lacked appropriate qualifications to be involved
in environmental matters. They indicated that even though they had a role as good corporate
citizens, environmental accounting was quite subjective and a lack of guidance embodied in
mandatory standards restricted their involvement in environmental issues to giving a financial
account of the companys environmental performance improvements.
Environmental reporting
As noted earlier, environmental reporting in the FSC is accomplished through the medium of the
annual report and separate environmental reports. The environmental reports are kept highly
confidentialthe researchers attempts to gain access to them were unsuccessfuland they are
used solely for internal decision making. But accountants do play a primary role in the disclosures
of environmental information in the annual reports in that they disclose information about the
companys investment in environmental protection.
A content analysis of the FSCs annual reports for the period of 19911998 was undertaken, this
period following on from Nandans (1992) research into SEA practices in Fiji. That study of the
period from 1988 to 1990 had shown that environmental disclosures were not provided by public
companies in Fiji. The current study attempts to ascertain whether environmental disclosures
have been provided subsequently. It also analyses the content of such environmental disclosures
and evaluates their adequacy and desirability. The results of the content analysis of the FSCs
annual reports, 19911998, are presented in table 2.
[table 2 about here or as soon as possible after]
The data summarised in table 2 indicate that the FSC carried out serious environmental reporting
only from 1993 onwards20 years after its establishment following the Fiji governments
purchase of the Colonial Sugar Refining Companys shares in South Pacific Mills Limited as well
as the companys freehold land. However, the disclosure of environmental information after that
date lacks consistency and appears to be inadequate. Further, the environmental disclosures

15

involve only good news, consisting primarily of avowals of the companys commitment to
sustainable development and details concerning the investment in environmental impact control
technology. Details on the environmental impact of the companys operations, environmental
policies and objectives, the conduct of environmental audits, the resultant environmental reports
and any environmental violations by the company are conspicuously absent.

Table 2 Some observations on the FSCs environmental disclosures, 19911998

Year

Observations

1991

Mentions the effective utilisation of natural resources as part of the companys

corporate philosophy

1992

Mentions the effective utilisation of natural resources as part of the companys

corporate philosophy

1993

1. Mentions the effective utilisation of natural resources as part of the companys

corporate philosophy
2. The directors report includes a section titled The Environment, which:
outlines installation of water digestion ponds in 3 of the 4 mills
states that cane waste is recycled to provide fuel for boilers, reducing
dependence on fossil fuels
notes that the company considers environmental factors when purchasing
new equipment
states that the company is committed to environmental protection
3. The managing directors statement makes no mention of the environment

1994

1. The directors report includes a section titled The Environment, which:

indicates that the company considers environmental factors when
purchasing new equipment
states that the company is committed to environmental protection
mentions the investment in the upgrading of effluent systems in the Labasa

16

and Rarawai Mills, with monetary values attached to investments

2. The managing directors statement makes no mention of the environment
1995

1. States that the report is printed on a waste product of the sugar production
process, implying that the company is environmentally friendly
2. The directors report has a section titled The Environment, which:
states that the company is committed to environmental protection
highlights investments in effluent treatment systems at the Rarawai and
Labasa Mills, with monetary values attached to these investments
talks about the hiring of consultants to monitor and report on the
performance of the new effluent systems.
3. The managing directors statement asserts that environmental awareness of the
impact of the corporations operations on Fijis rivers, oceans and natural resources
and high standards of environmental guardianship remain part of its objectives

1996

1. States that the report is printed on a waste product of the sugar production
process, implying that the company is environmentally friendly
2. The directors report does not have a separate section on the environment. Instead,
environmental issues appear under the heading of Fixed Assets, Depreciation and
Capital Expenditure. Investments in effluent control systems in Rarawai and Labasa
Mills and improvement to effluent discharge facilities at the Lautoka Mill are
disclosed, with their monetary values. The corporations commitment to
environmental protection in terms of its measures to eliminate the discharge of
pollutants to the natural water systems is also mentioned, although these
environmental control measures are not actually described

1997

1. The mission statement of the company includes a comment on the commitment to

environmental protection
2. The directors report has a section titled The Environment, which:
maintains that the company is committed to environmental protection
indicates that improvements to the effluent discharge facilities at the
Lautoka mill are continuing
states that the effluent treatment systems at the Rarawai and Labasa Mills
are performing satisfactorily

17

suggests that the emphasis in the future will be on controlling and

minimising the discharge of effluents at source
1998

1. The mission statement of the company includes a comment on the commitment to

environmental protection
2. The directors report has a section titled The Environment, which:
states that the company is committed to environmental protection
indicates that the relocation of the effluent outfall further into the sea in
Lautoka should ensure increased dilution of the effluent and minimise
effects on marine life
reveals that reclamation work has been carried out at the treatment ponds
inside the mills
maintains that the company will continue close monitoring of the discharge
and treatment of effluents to ensure minimal effect on the environment
3. The managing directors vision, which provides details on the Sugar
Industry Strategic Plan and the companys Corporate Plan (19972001),
includes no mention of the environment, though employee issues are discussed

An analysis of the FSCs environmental accounting practice

It appears that the FSC undertakes environmental accounting to legitimise the sensitive nature of
its business operations rather than out of any sense of being accountable to the stakeholders for its
environmental performance. Even though the company includes environmental consciousness as
part of its mission statement in the annual report, Interviewee A mentioned that there were no
formal plans and policies to meet this objective, as there were for other items mentioned as
company objectives. Presumably the disclaimer in the mission statement is intended only to give
a public appearance of commitment to sustainable development. Further, the secrecy surrounding
the non-disclosure of the environmental policies and environmental reports casts some doubt on
the credibility of the companys environmental performance data. The vehement opposition by
the corporation to the proposed Sustainable Development Bill also devalues its claims to
commitment to sustainable development. As Interviewee B remarked:
This bill is too stringent. It is directly taken word by word from a New Zealand
environmental act and a lot of its provisions do not apply in the local context. We are

18

strongly opposing this bill in our submission to the government. Decreasing pollution
levels to the extent required by this Bill is highly impractical and can cause us a lot of
financial difficulties.
These comments, which conspicuously do not include suggestions such as moderating the
provisions, suggest a complete opposition to the Bill on the part of the company.
That the companys environmental performance is susceptible to public pressure is highlighted by
the following statements by Interviewee B:
Our activities are in the limelight all the time.
and
We would not be carrying out environmental control activities if there was no pressure
from external parties.
Clearly the company feels a need to legitimise its environmental performance in the eyes of the
stakeholders.
We have already noted media coverage of the outrage of residents living close to the Qawa River
about discharge of pollutants into this river by the FSC. The adverse effects of these pollutants on
marine life were obvious: dead and poisoned fish were found floating in this area. The companys
necessary response to these accusations was made as a letter to the editor in a local newspaper,
trying to convince readers of its non-involvement in this matter (Fiji Times, 28 Sept. 1998). Later,
the company also undertook dredging operations at the Qawa River in order to improve the
quality of the river. The FSC, in this instance, tried to legitimise its operations in the eyes of the
external constituents. However, during an informal conversation about the incident, Interviewee
A brushed off the seriousness with which the company appeared to regard this matter. He averred
that the river had already been pretty much polluted before the company began its operations in
the area and that the matter was exaggerated out of all proportion by the media. Similarly, the
companys most recent annual report makes no mention of the Qawa River incident, even though
such information would be useful to those living near the river as well as to the general public.

19

There is a growing public sense that the corporation has to be held accountable for the
environmental impact of its operations, and environmental accounting and reporting can be used
as the mechanism to provide such accountability to the wider society. Unfortunately, this practice
is limited at present, the tendency being to restrict disclosures in annual reports to the good
news, in order to legitimise the companys environmental performance. Nevertheless,
environmental lobby groups such as Greenpeace Pacific also continually monitor the companys
operations and carry out surveys to determine the impact of the corporations activities on the
environment. This applies pressure on the company to be environmentally sensitive. Two years
ago Greenpeace Pacific erected a Danger Pollution sign near the Lautoka mill as part of its
activities in connection with national environment week. Its survey near the Lautoka mill had
indicated low oxygen levels in the water at a time when the sugar cane crushing had not even
begun (Fiji Times, 6 June 1998). It is believed that low dissolved oxygen levels have adverse
effects for marine life in that area.
Another possible reason to explain why the company has presently given environmental
accounting a low priority is the occurrence of natural disasters in the country early in 1998. A
prolonged period of drought followed a few months later by extensive floods in the Western and
Northern parts of Fiji had a drastic impact on the cane harvesting and crushing activities of the
company, causing it extreme financial hardship and leading to an enormous reduction in its stock
price. This situation did not remove the company from the spotlight, but the attention was due to
its faltering financial performance rather than its pollution record and the focus shifted from the
Qawa River incident to the natural disasters. The company concentrated on trying to improve its
production process and the associated financial performance, relegating environmental
management and reporting to a low priority.
The literature on environmental accounting presented in this paper suggests that accountants have
the potential to play a vital role in environmental management and reporting within their
respective organisations. Similarly, it seems to be believed that environmental reporting can be
used to extend a companys accountability to society in the matter of its environmental
performance. However, the empirical data of this research are not reflective of such observations.
The case study illustrates that accountants are not involved in environmental management, while
environmental reporting is public relations driven and far from comprehensive.
Recommendations for the environmental accounting practice of the FSC

20

A survey of the literature suggests that performance indicators are required for environmental
control activities. This is where the accountants role takes centre stage. The FSCs
environmental accounting practice, by isolating accountants from the action, neglects
assessment of its environmental control activities. Accountants in this organisation need to move
away from their conservative traditional roles and to use their measurement and performance
appraisal skills to make the company more accountable to society. Evaluating the performance of
company policies on sustainable development can provide accountability. Accountants in the FSC
need to assess the results of the environmental plans, structures and activities, and to determine
the extent to which operations are actually moving towards minimising impacts on the
environment. They also need to disclose this measurement of environmental control performance
in the companys annual reports. At the same time, their managerial skills will be of use in
establishing environmental management systems within the organisation. Accountants will have
to use their position of authority and influence in the organisation to lead the environmental
accounting revolution in the company. In addition, their auditing skills could be expanded to
cover environmental audits and the provision of an independent attestation of the corporations
environmental performancealthough in that case some knowledge in environmental science
may be a further requirement.
The FSCs conventional accounting practice will also need to incorporate environmental factors.
Processes clearly in need of improvement include: the identification of environmental costs and
benefits; elimination of requirements of conventional accounting that are in conflict with
sustainable development; forecasting of environmental risks and contingencies; serious
consideration of the environmental implications of investment; and the development of
environmental management systems.
There is an urgent need for the corporate annual reports of FSC to improve both the quantity and
the quality of the disclosure of environmental information. The company could present
information on its environmental policy and the results of environmental performance
measurement, as well as summarised versions of the environmental reports, and patterns and
trends in sustainable development over a period of a few years. This reporting should be
quantitative as well as qualitative. A suggestion is given in figure 3 for the outline of a section of
the annual report devoted to the environment and environmental policies.

21

Figure 3 A suggested classification for environmental disclosures in the FSCs corporate

annual report
The Environment

Mission Statement for the Environment

Details of Companys Impact on the Environment

Environmental Policy

Details of Environmental Audits and other Environmental Control

Activities

Results of Environmental Control Activities and proposed actions to

be undertaken

Record of Compliance with Environmental Legislation and other

Standards

Clearly, even though accountants have a key role in environmental management and reporting
and should move away from their traditionally conservative roles, certain changes in
contemporary practices would have to occur before such a radical movement could take place.
The academic training of accountants has to improve so that they are equipped with the necessary
skills in environmental management and reporting. Similarly, before accountants, such as those in
the FSC, could play a role in environmental management within organisations there would have
to be an improvement in environmental legislation and the introduction of stock exchange listing
requirements and mandatory accounting standards requiring disclosures of social and
environmental information. These changes would definitely provide an impetus for accountants to
become involved in environmental accounting mechanisms within organisations. It is hoped that
the introduction of the Sustainable Development Bill will prompt local accountants to be
increasingly involved in environmental matters.

22

Conclusion
This paper has highlighted the finding that in Fiji, as in other countries, contemporary
environmental management practice in public companies does not involve accountants in
bringing about organisational change (Gray et al. 1995). An in-depth analysis of the
environmental accounting practice of the FSC indicates that presently, involvement of its
accountants in the corporations environmental management strategies is only limited.
Furthermore, the companys environmental reporting mechanisms are inadequate and patchy,
largely because of the lack of mandatory standards for the disclosure of environmental
information.
The environmental accounting strategies of the FSC could be improved through the utilisation of
the managerial, performance measurement and evaluation, auditing, and reporting skills of
accountants. The research has demonstrated that the companys environmental management
systems and disclosures of environmental information are inadequate in extending to the wider
society the broader stewardship role that environmental accounting mechanisms are intended to
provide. Suggestions for improving the present disclosures of environmental information in the
corporate annual reports of the FSC have also been put forward.
Current environmental accounting in the FSC is an attempt to legitimise sensitive aspects of the
companys manufacturing operations rather than being an accountability device to broaden
stewardship to the stakeholders. This case study indicates that even though accountants have the
potential to play a key role in environmental management and reporting in organisations, the fact
that at present environmental accounting practice is voluntary has meant that they are noticeably
uninvolved in these mechanisms. Voluntary disclosures of environmental information are also
likely to be influenced by a companys desire to improve its public relations portfolio, as
exemplified by the present case study. Accordingly, it is believed that a regulatory approach
through environmental legislation and mandatory standards would be the way forward towards
realising the full potential of environmental accounting.

Acknowledgments

23

I am indebted to several members of the Accounting and Financial Management Department in

the University of the South Pacific for advice, assistance and suggestions given during the
research and writing of this paper. Dr Ruvendra Nandan, Mr Umesh Sharma, Mr Richard
Andrews, Mr Ben Coutman and Professor Michael White deserve particular mention. Thanks are
also extended to attendees of the seminar during which an earlier version of this paper was
presented, for their constructive comments and suggestions. The advice and suggestions of
Emeritus Professor Mohan Lal of Massey University during his visit to Fiji are also highly
appreciated. Without the wonderful collegial support of all these people the paper would have
been incomplete. This is in no way to imply that any remaining errors of fact or interpretation are
other than my own.
Dr Philomena Gangaiya and Dr John Bonato of the School of Pure and Applied Sciences in the
University of the South Pacific also helped to brief me on the environmental problems that exist
today. Their assistance was extremely useful as it helped to broaden my understanding of
environmental issues. Beyond the USP, I would also like to thank Mr Ram Moosad, Mr Uba Datt
Ali and Mr Subash Chandra, all with the FSC, for providing me the opportunity to study the
environmental accounting practice of the company. This project would have been incomplete
without their cooperation and assistance. To Professor Rob Gray and Ms Hazel Batchelor of the
Centre for Social and Environmental Accounting Research (CSEAR) I owe thanks for having
sent me introductory material on environmental accounting.

Notes
1. The Bhopal gas leak, the Chernobyl nuclear explosion, the Love Canal tragedy and the Exxon
Valdez mishap are some examples.
2. Based on Hulm (1989), Thistlewaite and Davis (1996), Burt and Clerk (1997) and Nunn
(1999) as well as interviews held with Greenpeace and Fiji Department of Environment staff,
and local environmental scientists.
3. Sustainable development is defined in the oft-cited 1987 Brundtland report as: meeting the
needs of the present without compromising the ability of future generations to meet their
needs (Burt & Clerk 1997; Gray & Bebbington 1998; Gray et al. 1998).

24

4. Most of the executives in any major business organisation deal with financial matters. Hence,
the directors, president, vice-presidents, chief executive officers (CEOs), business managers
etc. of most organisations usually have competence in accounting or have been accountants.
5. The SEA debate emerged in the 1970s, when an idealistic minority theorised that businesses
should have a broader role than simply to make profits or increase the wealth of shareholders.
The articulation of the belief that companies had a responsibility to the environment, their
employees and the wider community was a significant catalyst for the debate..
6.

Based on a report by the International Federation of Accountants (IFAC) entitled

Environmental Management in Organisations: The Role of the Management Accountant. But

see also Gray, Bebbington and Walters (1993), Medley (1997) and Gray et al. (1998).
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