Making a difference: Sustainability reporting, accountability and organisational change

by Carol A Adams and Patty McNicholas. Published in the Accounting, Auditing and Accountability Journal. At the time of posting this article has been downloaded over 9,000 times from the journal website.  Citations to the article are here.

Abstract The purpose of this study is to contribute to the understanding of corporate processes for developing a sustainability report, the hurdles faced by organisations and the way in which organisational change towards improved accountability occurs and can lead to changes in sustainability performance.

This research involves engagement through an action research approach involving the observation of corporate meetings, the provision of feedback on those meetings by the researchers and review of internet and hard copy sustainability reporting.

The study identified a number of impediments to the development of a sustainability reporting framework and its integration into planning and decision making, as well as forces for change. These were analysed using the organisational literature, particularly Kurt Lewin’s integrated model of planned change. Differences were observed between the state-owned organisation and prior studies of shareholder owned companies in their motivations for achieving sustainability and greater accountability.

From the organisation’s perspective, the study provided immediate feedback which enhanced reporting practices and the incorporation of sustainability issues into decision making. The study has the potential to improve practice in other organisations through the identification of impediments to and forces for change not considered in prior theorising.

The action research approach contributes to knowledge and theorising in a way which could not have been achieved through interviews alone. It assisted change within the organisation in: adopting a sustainability reporting framework; integrating sustainability issues into planning and decision making; and, further embedding sustainability and accountability values. The findings in the state owned organisation contrast recent findings for shareholder-owned companies.

This article is © Emerald Group Publishing and permission has been granted for this version to appear here ( Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.

Article citation: Carol A. Adams, Patty McNicholas, (2007) “Making a difference: Sustainability reporting, accountability and organisational change“, Accounting, Auditing & Accountability Journal, Vol. 20 Iss: 3, pp.382 – 402 DOI (Permanent URL): 10.1108/09513570710748553 


Much of the prior literature examining factors influencing, or motivations for, sustainability reporting has examined aspects of reporting without reference to the internal organisational context, including the processes of reporting and attitudes which influence decision making regarding reporting (Adams, 2002). Typically this prior work has examined the relationship between reporting and various corporate characteristics and general contextual factors. These studies and their key findings are summarised in Adams (2002).

A small number of researchers have begun to interview company personnel to determine their attitudes to corporate social responsibility and sustainability reporting, to examine the internal reporting processes and the impact of reporting on organisational change (Adams, 1999, 2000; Larrinaga-González et al., 2001; O’Dwyer, 2002, 2003). Some recent studies have considered the challenges to organisations presented by the emergence of stakeholder theory and stakeholder engagement to actively engage with a wide range of stakeholder groups that have concerns about sustainability issues (Owen et al., 2001; Unerman, 2004; O’Dwyer, 2005).

O’Dwyer (2002) conducted interviews in late 1997 with senior managers in 27 Irish public limited companies to examine managerial perceptions of motives for corporate social disclosure. Most of the senior executives interviewed argued that the prime motive for sustainability reporting was to enhance corporate legitimacy. Although some managers felt that sustainability reporting might be counter productive to achieving corporate legitimacy due to widespread scepticism to corporate announcements at the time of the study, O’Dwyer (2002, p. 427) noted that: “While some managers alluded to concerns for accountability to the wider society, there was little in the perspectives that suggested any motives outside those of a symbolic self-interested nature”. When asked about corporate social responsibility O’Dwyer’s sample interpreted it narrowly in a manner consistent with goals of shareholder wealth maximisation (O’Dwyer, 2003).

Larrinaga-González et al. (2001) conducted case studies in nine Spanish organisations including a total of 15 semi-structured interviews. They found that those organisations disclosing the largest amount of environmental information were using their reporting to attempt to control the national environmental agenda and perception of corporate environmental performance. They concluded that where this was the purpose of reporting, it had little impact on organisational change. To analyse change, the authors used Laughlin (1991) distinguishing between morphostatic (superficial) and morphogenetic (authentic) change involving changes to interpretive schemes such as beliefs, values, rules and mission statements. They concluded that the changes taking place in their case study organisations did not imply morphogenesis.

The purpose of Adams’ (1999, 2002) study was to examine the impact of internal contextual factors, including internal processes as well as attitudes which might influence decision making about reporting. Interviews were conducted during 1998 with personnel involved in reporting in three British and four German companies in the chemical and/or pharmaceutical industries. The interviews explored: the organisational constituencies involved in decision making; the nature and extent of stakeholder involvement in the reporting process; reasons for sustainability reporting and its increase; the perceived costs and benefits of sustainability reporting; the extent to which the company studies other companies’ reports and refers to reporting guidelines; the media used to communicate ethical, social and environmental information; attitudes to reporting information which might be regarded as bad news; views on reporting in the future; influence of the extent of environmental regulation on reporting; views on environmental verification; and, links between the systems for collecting environmental and economic data. This study found that aspects of the reporting process and attitudes to reporting were likely to impact on the extensiveness, quality, quantity and completeness of reporting. Further, sustainability reports involve input from a number of individuals and functions across an organisation pointing to the influence of corporate culture, power relationships and communication flows (Adams, 1999, 2002).

Through our observations of meetings and later interactions with participants in this study, we extend prior work through observation of the impact of reporting processes and attitudes, and identify other factors which might inhibit sustainability reporting. By adopting an action research approach, which to our knowledge has not been used in the sustainability reporting literature previously, we were able to gain insights that would have been difficult or impossible to obtain through interviews alone.

Our study provides insights into both the drivers and possibilities for sustainability reporting and the potential of sustainability reporting to bring about change within organisations. We analyse this potential using Lewin’s (1947) Field Theory, Group Dynamics, 3-Step Model and an adaptation of his approach to action research. Field Theory, Group Dynamics and the 3-Step Model are used to highlight the potential of the sustainability reporting process to bring about change. Our action research approach and the 3-Step Model are used to realise change within our case study organisation.

The structure of the remainder of the paper is as follows: organisational change; action research; organisational background; observation and feedback, and, conclusions.

Organisational change

Kurt Lewin (1890-1947), a psychologist and leftist German Jew who moved to the USA in 1934 following the election of Hitler as Chancellor the previous year (Cooke, 1999; Burnes, 2004b), is regarded by many as the intellectual father of contemporary theories of change (Schein, 1988; Hendry, 1996). Lewin valued democracy, social justice and equal rights for minorities, arguing for example, that:

“… discrimination is basically linked with problems of management, with the actions of gate keepers who determine what is done and what is not done” (Lewin, 1947).

It would seem that the methods he used to facilitate change, and the situations to which he applied them, were influenced by his values, something which he acknowledged:

“Today, more than ever before, democracy depends upon the development of efficient forms of democratic social management and upon the spreading of the skill in such management to the common man … To my mind, fair mindedness is the essence of scientific objectivity. The scientist … has to see realistically the problems of power, which are interwoven with many of the questions he is to study, without his becoming a servant to vested interests … The problem of our own values, objectives, and of objectivity are nowhere more interwoven and more important than in action-research … One cannot overemphasise the importance of the spirit of cooperation and of social responsibility for research on group processes …” (Lewin, 1947).

He developed an integrated model of planned change at the group, organisational and societal levels incorporating Field Theory, Group Dynamics, a 3-Step Model and Action Research. Field Theory and Group Dynamics explain how social groupings are formed, motivated and maintained, whilst Action Research and the 3-Step Model are used to change the behaviour of social groups (Burnes, 2004b). Together they provide a holistic framework for considering the potential for sustainability reporting and the sustainability reporting process, to facilitate change towards greater accountability for improved sustainability performance. Through the focus on corporate culture, relationships between organisational members, the nature and flow of communications, they allow insights into the potential for organisational change towards improved accountability and sustainability performance beyond that of considering sub-systems, design archetypes and interpretive schemes (see Greenwood and Hinings, 1993, 1996; Laughlin, 1991).

Lewin’s Field Theory views the status quo as being the maintenance of the balance of opposing forces, with changes in behaviour occurring when forces in the environment or “field” occur. In Lewin (1947) he illustrates this through consideration of the forces for and against (i.e. the resistances to) change in the degree of discrimination between races. We would suggest that in applying this theory to the development of corporate sustainability reporting, change might occur through modification in the balance and strength of the general contextual factors (media pressure, stakeholders, social political and economic context) influencing reporting as discussed in Adams (2002). For example, increased government pressure or a perceived change in the balance between the costs and benefits of sustainability reporting might lead to an increase in reporting. We would also suggest that the process of preparing a report and the subsequent visibility of sustainability performance data and increased embeddedness of sustainability values leads to changes in sustainability performance.

In putting forward the concept of “group dynamics”, Lewin argued that changing the behaviour of individuals in isolation would not result in change due to group pressure to conform. Consequently, efforts to promote change should be focussed upon the group, for example, by challenging group norms, roles, interactions and socialisation processes (Schein, 1988; Burnes, 2004a, b). A sustainability reporting team includes individuals from different functions within the organisation. Their different perspectives are frequently challenged. For example, the public relations and environmental teams often have opposing views on report content and style (Adams, 1999, 2002). The team also faces these challenges from other organisational participants, such as the Board, the CEO, the CFO, functional and business department managers. Thus, the dynamics between members of the sustainability reporting team and between team members and other organisational participants, in theory, have the potential to lead to the unfreezing of individual views and hence to change.

We contend that stakeholder engagement, an important aspect of many organisations’ sustainability reporting process, has the potential to be a particularly powerful driver for change, because its purpose is to challenge the company’s role in social and environmental sustainability. Lewin’s 3-Step Model of an integrated approach to bring about planned change involved unfreezing, changing and refreezing. We would suggest that stakeholder engagement, which challenges the perceptions of organisational participants, may facilitate the first step, “unfreezing” in Lewin’s 3-Step Model (Lewin, 1947, p. 330):

To break open the shell of complacency and self-righteousness it is sometimes necessary to bring about an emotional stir up.

Schein (2002, p 36) describes Lewin’s “changing” phase as involving: “learning new concepts, new meanings and new standards; imitation of and identification with role models; and, scanning for solutions and trial and error learning”.

Schein (1996) argues that whilst Lewin’s 3-Step Model of change has been criticised as simplistic, unlike contemporary trivial and superficial theories of attitude change, Lewin’s insight into change as a profound psychological dynamic process, involving painful unlearning and difficult relearning, is the key to understanding human change. Along with very specific environmental or social disasters resulting from corporate action, we would expect robust stakeholder engagement processes to be an important part of the unfreezing process of organisational change to become more socially and environmentally sustainable. Unfreezing is most likely to occur in a situation where stakeholders can express their views without fear of reprisals. It is also likely to occur where stakeholders take radical action, such as a consumer boycott or industrial action, outside of the sustainability reporting process.

A sustainability report might be likened to Lewin’s (1947) “general plan” for social action or, as applied here, for organisational change. Burnes (2004a) argues that Lewin’s planned approach for change remains robust today, pointing to its common ground with the more contemporary complexity theories:

Planned social action usually emerges from a more or less vague “idea”. An objective appears in the cloudy form of a dream or wish, which hardly can be called a goal. To become real, to be able to steer action, something has to be developed which might be called a “plan”. The transition from an idea to a plan presupposes that: (i) The objective has to be clarified; ii) The path to the goal and the available means have to be determined; iii) A strategy of action has to be developed. These three actions together make up the “general plan” which is to precede action (Burnes, 2004a).

The corporate sustainability vision might be likened to the initial “cloudy form of a dream or wish”; the more detailed “objectives” and “targets” to the clarification of goals, while the process of engaging internal and external stakeholders, setting targets, and monitoring outcomes might be likened to determining “the path to the goal” and the “strategy of action”. The corporate sustainability report and the sustainability reporting process then might themselves be a catalyst for change towards improved sustainability performance. A “failed” organisational change project might be one where a lack of communication between individuals in the sustainability reporting team, other organisational members and stakeholders external to the organisation means that improvements in sustainability performance are not identified or not implemented throughout the organisation. This assumption would seem to be supported by Ford and Ford’s (1995) claim that:

“… intentional change is based in and driven by particular types of communication… in the absence of communication there is no intentional change and no intentional change process” (Ford and Ford, 1995).

Ford and Ford (1995) distinguish between four types of change conversations: initiative conversations; understanding conversations; conversations for performance; and, conversations for closure. We would argue that all of these are present in best practice sustainability reports and sustainability reporting processes which include, for example, the setting of sustainability objectives, stakeholder engagement, the process of setting targets and the reporting of performance against targets.

Despite the theoretical potential for sustainability reporting and the sustainability reporting process to bring about change, this does not appear to have occurred in practice (Larrinaga-González et al., 2001; O’Dwyer, 2002) indicating perhaps that these conversations are not taking place i.e. that the reporting process is flawed. In the next section we discuss our action research approach to bring about change within our case study organisation.

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Action research

This study was undertaken using an “action research” methodology, the term originating primarily in the work of Kurt Lewin and his colleagues in the mid-1940s (Cady and Caster, 2000; Karmin, 2001; Cooke, 1999; Lewin, 1947). As the name suggests, action research is an approach to research that aims to both take action and create knowledge or theory about that action (Coughlan and Coghlan, 2002). The outcome of combining “action” with “research” is to overcome important social and organisational issues together with those practitioners who are experiencing the issues directly (Cunningham, 1993; Cardno and Piggot-Irvine, 1996; Davison, 2001; McKay and Marshall, 2001; Reason and Bradbury, 2001; Naslund, 2002). Thus, it is a form of engagement with organisational participants that leads to change allowing the researchers to observe the change process. In proposing “research leading to social action”, or, action research, Lewin (1947, pp. 150-1) remarks that:

“Research that produces nothing but books will not suffice. This by no means implies that the research needed is in any respect less scientific or “lower” than what would be required for pure science in the field of social events. I am inclined to hold the opposite is true.”

Action research has some broad characteristics that define it and distinguish it from case study research involving interviews and/or observation. First, it typically works through a cyclical four-step process of intentionally: planning, taking action, evaluating that action, leading to further planning and so on, thereby promoting skills of inquiry, reflection, problem solving, and action (Rock and Levin, 2002). This cycle can be repeated in the same context until satisfactory outcomes have been achieved (McKay and Marshall, 2001). Second, action research is participative. Members of the case study organisation actively participate in the cyclical process, rather than merely being objects of the study (Olesen and Myers, 1999). The actors work together so that the issue/s may be resolved or the system improved (Reason, 1999). Third, action research is concurrent with action. Therefore both the researchers and practitioners are able to gain knowledge through participation in the project. Hence this methodology provides a powerful means of improving and enhancing practice as well as bridging the theory-practice gap, as the action/solutions are the result of the combined efforts, expertise and knowledge of both the practitioners and researchers (Cardno and Piggot-Irvine, 1996). Fourth, action research is both a sequence of events and an approach to problem solving. As a sequence of events, it comprises cycles of gathering data, feeding data back to the practitioners, analysing the data, planning action, taking action and evaluation, leading to further data gathering and so on. As an approach to problem solving it is an application of fact finding and experimentation to practical problems requiring action and solutions involving the collaboration and co-operation of both the practitioners and researchers, without which projects cannot be successfully undertaken and completed (Clark, 1972; Cardno and Piggot-Irvine, 1996; Avison et al., 1999; Gronhaug and Olson, 1999; Olesen and Myers, 1999; Davison, 2001; McKay and Marshall, 2001; Sax and Fisher, 2001; Coughlan and Coghlan, 2002; Earl-Slater, 2002). The desired outcome of the action research approach is not just solutions to immediate problems, but also intended and unintended outcomes, as well as making a contribution to knowledge and theory development. Today a variety of forms of action research are undertaken varying in the strength of the intervention and the extent to which they are driven by theory, inform theory and critically analyse the organisation’s assumptions and interventions (Jönsson and Lukka, 2006).

Essentially action research requires a real issue of both research and managerial significance upon which the organisation is embarking that has an uncertain outcome. The organisation must also be willing to be the subject of rigorous inquiry thereby enabling the undertaking of a “live” case study in real time. The researcher has to gain access and be contracted as an action researcher before the study can proceed (Schein, 1999; Gummesson, 2000). A crucial element is to ensure that both the researcher and all the contacts within the organisation have a clear, specific and agreed information of what is to take place (Mumford, 2001). Key members of the organisation must develop an understanding of the context of the action project to determine why the project is necessary and desirable, and what the economic, political, social and technical forces are that are driving the need for action (Coughlan and Coghlan, 2002).

Data may be gathered in a number of ways, depending on the context. Hard data may consist of operational statistics, financial accounts, marketing reports, sustainability reports, as well as detailed examination of the organisation’s web site. Data is also gathered through participant observations, discussions and interviews (Robson, 1993; Meyer, 2000; Karmin, 2001). The action researcher collects the data, analyses it and then provides the findings to the organisation, which then provides feedback on the findings. This approach of sharing information and analysing data collaboratively facilitates the action research approach (Cardno and Piggot-Irvine, 1996; Harris and Harris, 2001; Coughlan and Coghlan, 2002). The rationale for collaboration is that the clients know the organisation best, know what will work and ultimately are the actors who will be required to implement and follow through the actions to be taken. Hence, their involvement in the analysis is critical. Effective action research can also involve the complexity of multiple activities occurring during the research process. The nature of participative collaboration can involve political aspects of knowledge production, whereby knowledge gained through people’s lived experiences aims to empower them to produce further knowledge and action that will benefit them directly in the short and long term (Reason and Bradbury, 2001; McNicholas and Barrett, 2005; McNicholas and Humphries, 2005). The methodology allows the researchers to remain focused on the problem and allows the organisation to take immediate remedial action. Thus action research involves the dual imperatives of problem solving and research (McKay and Marshall, 2001). The process of change, of particular interest to the authors of the current study, becomes the main focus of the project (Naslund, 2002).

Data collection in this study involved the researchers observing and later participating in meetings over an eight-months period, a later follow-up meeting and detailed examination of documents up to August 2006. These included the organisation’s web site, Annual Reports and other documents, such as drafts of Annual Reports that were provided to the researchers during the course of the meetings, as required by an action research project (Meyer, 2000; Rock and Levin, 2002).

During weekly meetings in May and June 2003, each lasting approximately one hour, the researchers acted as observers only and took written notes in an endeavour to establish the extent of experience in, and knowledge of, the accountability processes and reporting practices of the Management Team (hereafter referred to as the Team). The researchers discussed these observations in order to reach a consensus on the relevant issues which were then recorded. At subsequent meetings from June 2003, the researchers interacted with the Team to provide feedback on how to enhance the various documents that were being prepared.

The Team responsible for incorporating the Sustainability Report into the Annual Report 2002/2003 consisted of the Business Services Manager, Public Relations Manager and Environmental Governance Manager. The water industry in Australia, unlike other Australian organisations, tends to include their full sustainability report along with financial information in a combined “Annual Report”, although this is not a legal requirement.

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Organisational background

The case study organisation[1] was constituted in the State of Victoria, Australia in late 1994 under the 1989 Victorian Water Act and has a statutory obligation to report to the Minister for Water for the State of Victoria on an annual basis. The organisation is a government-owned statutory authority that seeks to provide high-quality water to a population base of more than 130,000 people and 41 towns in regional Victoria. It also provides wastewater services to 23 towns and waste recovery services to both residential and industrial customers. An integral part of its customer base is major local industry that accounts for approximately 75 percent of the total water sold. Of the 15 non-metropolitan urban water authorities in Victoria, the organisation is the largest in terms of total water supplied and volume of wastewater collected. Its waste business represents a 70 percent market share of all waste produced in the region and the authority has strategic significance for the State as a whole in supporting a number of state-wide industries. Thus our case study organisation is part of an organisational field that collectively constitutes a recognised area of institutional life (Di Maggio and Powell, 1983). As such it participates in a common meaning system and interacts more frequently with other water authorities and companies, than with actors from outside the field (Scott, 1995).

The organisation operates in a unique geographical and environmentally sensitive location. As such, it has sought to be environmentally conscious and proactive in ensuring that its services render minimal impact to the local ecological environment. It is required to operate within stringent Environment Protection Authority (EPA) guidelines, as part of the water industry with common regulation (Di Maggio and Powell, 1983). For several years the organisation has advocated the need for a fully integrated approach to natural resource management within natural catchments. It works with its local community through a number of committees to pursue co-ordinated research and knowledge transfer, which provides a channel for open-communication and feedback (Annual Report, 2002/2003). Hence, the organisation has attempted to embrace stakeholder engagement as a driver for change.

In the 2002-2003 financial year the organisation had approximately A$480 million worth of assets, generated annual revenue approaching A$50million and employed about 180 staff. The organisation claims that it continually seeks to improve its workplace culture to foster the growth in skills and confidence of employees. During the 2002-2003 financial year it conducted its fourth Organisational Self-Assessment against the Australian Quality Council’s Business Excellence Framework, as well as its third organisation-wide Employee Opinion Survey to assess progress towards these goals. Such surveys, it claims, enable improvement opportunities to be identified and action plans to be developed.

The organisation operates under a corporate structure with a Board of seven members and Executive, which consists of the Chief Executive Officer (CEO) and General Managers of Corporate Services, Customer Services and, Environment and Planning. The CEO had expressed a desire for greater accountability by the organisation, indicating that forces were already present to produce change (Schein, 2002). It was noted that several examples of “bad news” issues were reported on the organisation’s web site prior to the involvement of the researchers. Its Corporate Strategy encompasses the organisation’s Purpose, Vision, Values and Seven Areas of Strategic Focus being:

  1. corporate governance;
  2. customer service;
  3. natural resource management;
  4. organisational sustainability;
  5. waste recovery;
  6. wastewater services; and
  7. water services.

The three managers responsible for developing the organisation’s first sustainability report had been employees for approximately five or six years. These managers came from diverse educational backgrounds with qualifications in the business, marketing and applied science disciplines, and did not have any previous experience in developing sustainability reports. The organisation therefore lagged behind metropolitan water companies that had started sustainability reporting earlier (see ACCA, 2004). As such, it could be argued that the organisation was less likely to engage in innovative practices and more likely to conform to institutional practices (Larrinaga-González, forthcoming). The CEO initially approached the first named author requesting her assistance as a consultant to develop a sustainability reporting framework, but in place of any kind of financial reward, agreed to allow the researchers full access to staff and permission to write up the work anonymously.

This article is © Emerald Group Publishing and permission has been granted for this version to appear here ( Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.

Observation and feedback

Following an initial meeting between the first author and the CEO, the researchers met with the CEO and the Management Team (the Team) in February 2003. The purpose of this meeting was to: identify the issues in adopting sustainability reporting from the organisation’s perspective; to determine whether we would be able to interact with and assist the Team; and, to set out our approach to ensure that our engagement with the organisation allowed us to add to the existing literature and knowledge of reporting processes and issues, and the extent to which they might lead to improved accountability and sustainability performance. It was important that the terms of the project be established before the research proceeded (Schein, 1999; Gummesson, 2000; Mumford, 2001). It was agreed that we would initially observe then provide feedback and interact with the Management Team to assist them to improve and enhance their reporting practices. The Team’s focus on the integration of sustainability issues into other functions was not planned at this stage. The need for this became apparent through the reporting process.

Prior to the first meeting we had formed the view that the organisation was committed to sustainability reporting as evidenced by: the extent and nature of “bad news” reporting on the organisation’s web site[2]; the request by the CEO to the lead researcher for assistance with sustainability reporting; the CEO’s stated values with regard to sustainability issues and transparency; and, the apparent (from the Internet reporting) embeddedness of its Seven Areas of Strategic Focus. During the meeting, we formed the view that the CEO had strong values with respect to sustainability issues and transparency, and these were also reflected by the other managers present. The CEO indicated that the organisation was committed to the concept of sustainability reporting and sought to incorporate sustainability principles into their daily work practices. We were able to view the Seven Areas of Strategic Focus in a number of locations in the organisation’s offices.

The Business Services Manager led most of the meetings we observed, as he was responsible for the content and accuracy of the Annual Report and its production. He was also directly accountable to the CEO in respect of this project. Consequently he designated the various areas where information was to be collected by Team members for the Annual Report.

During the observation meetings the Team discussed what they do now and what they were aiming to do in the future, in order to determine their priorities, expectations and the timelines to be adhered to. The major purpose and desired outcome for them was to produce an Annual Report with the inclusion of a Sustainability Report for the current year.

Sustainability self-assessment tool and planned actions

As a means of developing a sustainability reporting framework the Team were also in the process of developing a Sustainability Self-Assessment Tool, which included a Self-Diagnostic Checklist that had been prepared from initial workings with the Victorian Water Sustainability Task Group[3]. The Business Services Manager had been involved in the development of these documents to assist organisations within the water industry in enhancing their sustainability practices. This involvement was an important “force” for change. The Sustainability Self-Assessment facilitated the identification of areas where improvements regarding Business Practice, Environmental, Social and Economic outcomes were needed. It adopted a three-point sustainability level scale of “low, medium and high” to determine how the organisation was currently performing. Team members had difficulty defining low, medium and high performance as issues included were different to those used by the organisation for “risk assessment” of their Financial and Occupational Health & Safety (OHS) areas. The responsibility for the completion of the categories were allocated to Team members based on the nature of the responsibilities, although it was acknowledged that there was some overlap and shared division of responsibility amongst the Team.

The Self-Diagnostic Checklist allowed the managers to assess their progress towards greater accountability, sustainability and stakeholder engagement. It included, for example an item about employees’ awareness of sustainability principles and another identifying the existing linkage, if any, between the employees’ performance appraisal and sustainability principles. Thus, the checklist prompted consideration of ways to embed and integrate sustainability principles throughout the organisation. Completion of the Sustainability Self-Assessment and Self-Diagnostic Checklist to identify the areas that required improvement was viewed by the Team as their first step towards sustainability reporting.

The interaction between the Team or “group dynamics” was part of the change process. The different perspectives and backgrounds of the Team members throughout this process facilitated the “unfreezing” of the participants’ perceptions. The managers were learning new concepts, meanings and standards; imitating and identifying with role models; scanning for solutions; and learning by trial and error. These are all elements of Lewin’s (1947) changing phase, the second step of his three-step model, as articulated by Schein (2002).

The Business Services Manager suggested the inclusion of the Environmental Management (EM) team during the finalisation of the Sustainability Self-Assessment Tool. The suggestion was made to address the Environmental Governance Manager’s concerns, that there could be an overlapping of responsibilities between the EM team and the current team regarding the finalisation and release of the organisation’s Sustainability Policy. This would provide an opportunity for the EM team to be involved in the Sustainability Self-Assessment process, increasing the possibility of a lasting change.

On completion of the Sustainability Self-Assessment and Self-Diagnostic Checklist, the Team decided that they would be continually updated in future meetings. They would also present them to the Board on a quarterly basis. Other priorities and tasks that were identified simultaneously to be actioned by the Team after completion of the Annual Report (incorporating the Sustainability Report) included; a review and finalisation of environmental policy, finalisation of sustainability policy, and a review and update of the current communication strategy with internal and external stakeholders. The linking of the sustainability framework with the organisation’s Seven Areas of Strategic Focus and employee’s everyday work was also viewed as necessary, and as a challenge by the Team. Identification and audit of the process used by their suppliers to report to the organisation and the inclusion of “sustainability” elements in future contracts was also deemed necessary. Together these actions had the potential to improve sustainability performance and indicate the Team’s attitude to reporting as a means for improving performance, rather than just an end in itself. Their intention was that the sustainability report and reporting process would be used as a “general plan” for action to improve accountability and sustainability performance throughout the organisation.

During these initial meetings the researchers noted that there was a difference in opinion between the Team and the expectations of the CEO, as to what the organisation could achieve in the current year. The Team did not think that a full Sustainability Report could be produced by the end of the financial year, due mainly to the lack of adequate resources such as time and staff. The Environmental Governance Manager held the view that, given limited resources, the sustainability responsibilities should be built-in to employee’s other responsibilities and performance appraisal. The Team nonetheless agreed that a sustainability reporting framework, that included the organisation’s main Key Performance Indicators (KPIs), could be produced, although the timescales limited the scope of sustainability reporting.

Stakeholder engagement with sustainability reporting

Earlier we contended that robust stakeholder engagement has the potential to facilitate the “unfreezing” required in Lewin’s 3-Step Model of change. The possibility of internal stakeholder involvement during the sustainability process, by involving employees at the Team leader level, was mentioned by the Team during the second meeting. This would have provided an opportunity to increase the organisation’s commitment to sustainability. However, no such consultation was observed to have taken place. Limited time to develop the reporting was a factor the Team were very much aware of.

During an observation meeting, the Team discussed external stakeholder engagement, especially from the community through various committees. The principal stakeholder committees that the organisation engaged with were the Environment and Customer Consultative Committee, the Waste Disposal Advisory Committee[4] and the Coastal Advisory Committee. The committee members, who were voluntary, were involved in providing feedback on issues such as environmental impacts. The committees also provided feedback during the finalisation of the Environmental Improvement Plans (EIP), but were not consulted by the organisation to assist in the development of sustainability reporting. The managers did not participate on these committees at the request of committee members. This is unfortunate, given their potential to act as a change agent.

The researchers observed that the Public Relations Manager did not completely understand the meaning of the term “stakeholder engagement” when completing the Sustainability Self-Assessment, which was then explained to him by the Environmental Governance Manager. When discussing the criteria of openness and incident reporting during the completion of the Sustainability Self-Assessment, there were some differences in opinion amongst the Team members, as to the extent of disclosure with the wider community. The Public Relations Manager argued that due to community involvement in various committees, the organisation was practicing a high level of transparency and openness. He was concerned however, that sustainability reporting was viewed by the public as a “public relations tool”. The Environmental Governance Manager commented that not all incidents could be reported to the community, because of restricted space in the report. All the incidents were nevertheless reported to the Victorian Environment Protection Authority (EPA), as part of the mandatory reporting requirements. Therefore the organisation was legally compliant. The researchers suggested that the web site might be used to report data that could not be included in the hard copy Annual Report.

Report content

The researchers observed that by the last week of June 2003, about five months after the first meeting, the Team was still debating the structure, headings, style and content of the sustainability reporting framework. Their continuing discussion appeared to be due to a lack of knowledge and understanding of the sustainability reporting process and its requirements. Differences in opinion with regard to the structure, content, layout and style of the report between the Team members were observed, indicating ambiguity and uncertainty about the consequences of their decisions. This discussion was resolved by identifying and studying the sustainability and annual reports of approximately 15 companies. Most of these companies were from the same sector as the case study organisation and were thought to be best practice examples of reporting style. This process led to the development of the Draft framework, headings and structure for sustainability reporting to be included as part of the Annual Report 2002/2003, and may be explained by the notion of “mimicry” in institutional theory (Di Maggio and Powell, 1991). Organisations imitate their peers that are perceived to have obtained success with respect to their reporting practices (Larrinaga-González, forthcoming).

A participatory meeting with the Team members was specifically arranged to clarify issues and fill in gaps in the researchers’ understanding of the process being followed, as a result of their role as observers only suggestions made by researchers on the process of developing the sustainability report are as follows:

  1. Seek feedback on reporting, including choice of KPIs, from the various stakeholder committee members and from employees.
  2. Improve the process of developing KPIs by starting with the Purpose and Vision of the organisation, linking these to the Seven Areas of Strategic Focus, and then linking the areas of strategic focus to the organisational KPIs.
  3. Examine best practice reports of organisations in other sectors and identify examples of reporting which the organisation might consider following. A number of “best practice” reports were suggested and exceptionally good and innovative practices in some were highlighted.
  4. Refer to guidelines such as AA1000 (AccountAbility, 1999) and the Global Reporting Initiative Guidelines and criteria of awards schemes such as the ACCA Sustainability Reporting Awards.

The lead researcher also provided feedback to the Team members as to how they could further improve their Annual Report content and structure (see Table I).

Following the feedback from the researchers, the Team appeared to be much more relaxed about the presence of the researchers at their weekly meetings. The Team agreed later that this was due to the fact that they were now more aware of how the researchers could contribute to the development of its sustainability reporting.

The researchers referred the Team to the Association of Chartered Certified Accountants (ACCA) and the Global Reporting Initiative (GRI) websites. The Team was aware of the GRI guidelines, but were reluctant to follow them in the current year’s Annual Report for a number of reasons. First, the GRI guidelines were thought to have too many indicators, some of which were not relevant to their sector. Second, the company was using the Victorian Water guidelines (see which were derived from the GRI guidelines. Third, the Team had a very short time line to present their Annual Report to Parliament.

During the following two meetings the Team discussed and finalised the structure, style and headings for the “Annual Report” for 2002-2003. The Business Services Manager was primarily responsible for the content, while the Public Relations Manager was responsible for the design. Various responsibilities were assigned within the Team for the collection and compilation of information for the report. Once the framework for the Annual Report had been finalised, feedback on its content, headings and style was provided by the researchers.

In reporting on Our People the researchers noted that information was provided on the gender breakdown of its employees, although many organisations do not (Adams and Harte, 1998). However, this did raise the question of: What about indigenous employees and ethnic minorities? (Adams and McPhail, 2004; McNicholas et al., 2004). The Business Services Manager indicated that discussions had been held with the local indigenous community regarding training schemes, but unfortunately the Department of Education, Employment and Training had withdrawn its funding.

This article is © Emerald Group Publishing and permission has been granted for this version to appear here ( Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.

Final comments

We observed that a key impediment to the development of a sustainability reporting framework in our case study organisation was lack of experience and knowledge on the part of the managers involved in the process. This encompassed:

  • a lack of knowledge as to what constitutes “best practice” sustainability reporting;
  • a lack of understanding as to how sustainability goals and reporting practices could be integrated into the organisation wide strategic planning process;
  • a lack of experience in engaging stakeholders in the reporting process and identification of KPIs (though stakeholders were engaged in discussions on sustainability issues);
  • difficulty in choosing between the variety of reporting guidelines and styles available; and
  • a lack of understanding of the difference between financial and economic indicators.

The discomfort that the managers felt at the observation stage of the study could be considered the emotional stir up (Lewin, 1947) necessary to bring about change. The researchers’ presence served to highlight to the managers their lack of knowledge and understanding of the sustainability reporting process.

Sustainability reporting was a learning process for both senior management and the Team responsible for preparing the Annual Report. To embed sustainability principles as part of the organisational culture was one of the reasons for the introduction of sustainability reporting. Other reasons included gaining recognition for sustainability reporting within its own sector by adopting the Victorian Water guidelines, which had not been published at the time of our study. In addition to improving the overall Annual Report content for the organisation, going through the sustainability reporting process also made the Team more aware of “best practices” within their own sector, as well as other sectors. We contend that this assisted in enhancing their understanding, knowledge and perceived significance of sustainability and sustainability reporting amongst the employees of the organisation (Schein, 2002).

In summary, using Lewin’s Field Theory (Lewin, 1947), the forces for change in our case study organisation were: the role of the owner of the company (the State of Victoria); the role played by the committed and charismatic CEO in driving the organisation towards greater accountability; the role of the managers in implementing sustainability reporting; the role of Victorian Water in facilitating and promoting sustainability reporting in the industry; the role the Business Services manager played on the Victorian Water Sustainability Task Force Group in developing a Sustainability Self-Assessment and Self-Diagnostic Checklist; and, finally, the competition from other water companies who were leading sustainability reporting practices in Australia. The forces against change, or resistances, stem from the lack of time to prepare the report and resources. This was the reason given for a lack of engagement with employees and the various stakeholder committees on reporting; and, later, the lack of verification of the reporting.


We contend that by working in collaboration with the managers in our case study organisation over an eight-months period, we were able to assist them to produce an Annual Report that included, for the first time, a Sustainability Report. In doing so we gained insights into the processes of change towards improved accountability and sustainability performance. Our engagement resulted in the integration of sustainability issues into organisational planning and decision making, and further facilitated the embedding of sustainability and accountability values. In keeping with an action research methodology, our involvement empowered the managers by enabling them to gain further knowledge and take action that has the potential lead to improvements in (accountability for) sustainability performance. Through action research we were able to assist the managers in overcoming the primary force against change i.e. lack of knowledge of how to develop a sustainability reporting framework and integrate it with other aspects of organisational planning and decision making. The managers demonstrated that they were experiencing change by learning new concepts, meanings and standards, the second step of Lewin’s three step model (Lewin, 1947; Schein, 2002). Their discomfort at our presence during meetings provided the emotional stir up required to bring about change, in particular by forcing them to confront their lack of knowledge and expertise.

We used Lewin’s integrated model of planned change as a framework for analysing the potential of the sustainability reporting process to lead to improved sustainability performance and to examine the factors which might contribute to or hinder change in our case study organisation. Through action research we were able to observe the forces which enabled the change towards greater accountability for sustainability performance. More research of this nature is needed to further contribute to our understanding of what drives organisational change towards improved sustainability performance.

In contrast to the companies interviewed by O’Dwyer (2003) and Larrinaga-González et al. (2001), the organisation in our study demonstrated a strong commitment to accountability from the CEO down and across all staff involved in the (unfreezing) process of developing a sustainability planning, monitoring and reporting framework. This commitment was demonstrated by the organisation before the researchers became involved by: the extent of reporting on negative impacts on the organisation’s web site; the CEO’s stated values with respect to accountability and his request for assistance with sustainability reporting; and, the nature of the organisation’s Seven Areas of Strategic Focus. Sustainability reporting was seen by the organisation as a means of introducing and reinforcing sustainability principles throughout the organisation by improving their integration into planning and decision making leading to improvements in sustainability performance.

Following his interviews with 29 corporate senior executives, O’Dwyer (2003, p. 548) concluded that:

“…there is evidence of a tendency for managers to interpret CSR [Corporate Social Responsibility] in a constricted fashion consistent with corporate goals of shareholder wealth maximisation.”

Our study of a government owned statutory authority points to the influence played by the nature of ownership. Another key difference is that whilst many of O’Dwyer’s senior executives insisted that their personal perspective of CSR would override any narrow corporate perspective consistent with goals of wealth maximisation, in our state owned organisation, the personal perspective of the CEO drives corporate culture. The personal perspective and integrity of the managers involved also clearly influenced the nature of reporting and the level of accountability achieved. Thus, in our case study organisation, where wealth maximisation for shareholders was not a driver, the factors influencing sustainability reporting differed somewhat from those identified in Adams (2002).

Much of the areas of lack of knowledge and understanding which we identified in our study contrast the situation in the large multinational company studied by Adams (2004). That company did have a number of years’ experience in sustainability reporting at the time of the study, was influential in the development of the Responsible Care guidelines and yet demonstrated a low level of accountability. This was evidenced by the different portrayal of its performance in its own reports as compared with reports of its performance in the media, by NGOs and other sources external to the company. A key component of this different portrayal was the lack of completeness of reporting and the omission of impacts which were material to key stakeholder groups. In contrast to a lack of desire to be accountable on the part of the organisation studied in Adams (2004), the key issue hindering greater accountability in our state owned case study organisation was lack of knowledge and experience.

In contrast to the findings of Larrinaga-González et al. (2001) from their study of nine Spanish companies, we did not find that our State-owned organisation used reporting to mould the scope of the environmental disturbance and the perception of environmental performance. For example, in our discussions with the management of the organisation we found a number of examples of relevant data which demonstrated good social or environmental performance which they had not considered reporting. Larrinaga-González et al. (2001) concluded that reporting which was used to influence the national environmental agenda, had little impact on organisational change. Our case study water authority did not use sustainability reporting to manipulate environmental performance. The process of developing a sustainability reporting framework did result in some organisational change. The most significant impact was the integration of sustainability issues into the strategic planning process and an increased focus on KPIs not previously reported. In contrast to the companies studied by O’Dwyer (2003), the forces of resistance against further change related primarily to lack of time and resources.

Future research might explore further the impact of ownership or of being a non-corporate organisation on the attitudes of senior managers to sustainability reporting and sustainability issues.

Our study has shown that, through action research, academics can assist organisations in bringing about improvements to their sustainability reporting processes, accountability and sustainability performance. Action research might also contribute to academic literature and theorising by improving our understanding of: what drives organisations to provide an account of their sustainability performance; what determines the level of accountability attained; the complex nature of the interactions and relationships between organisations and their stakeholders on sustainability issues; and the manner in which sustainability reporting processes impact on organisational change towards improved sustainability performance.

Table 1 Suggestions made by researchers on the process of developing the sustainability report


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This article is © Emerald Group Publishing and permission has been granted for this version to appear here ( Emerald does not grant permission for this article to be further copied/distributed or hosted elsewhere without the express permission from Emerald Group Publishing Limited.

The authors are grateful to Dr Ambika Zutshi and Dr Glen Whelan for their research assistance on this project; to the two anonymous referees, James Guthrie who handled the review process; Trevor Hopper, Carlos Larrinaga Gonza´lez and participants of the 4th Australasian Conference on Social and Environmental Accounting Research; the 2005 Critical Perspective on Accounting conference in New York and staff at a research seminars at RMIT, Melbourne, Deakin University in Melbourne and the University of Newcastle upon Tyne, UK for comments on earlier drafts.

Article citation: Carol A. Adams, Patty McNicholas, (2007) “Making a difference: Sustainability reporting, accountability and organisational change“, Accounting, Auditing & Accountability Journal, Vol. 20 Iss: 3, pp.382 – 402 DOI (Permanent URL): 10.1108/09513570710748553 

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