Keywords

1 Introduction

Corporate social responsibility and sustainability are on the agenda of corporations, governments and individual citizens throughout the world (Crowther and Ortiz-Martinez 2016). There has been a growing debate on the issue of social and environmental accounting (SEA) within public institutions, partly because social and environmental responsibility is central for the functioning of such institutions.

Environmental and social matters are regarded as strategic issues that go beyond mere compliance of regulations. Thus, integrating social and environmental accounting into mainstream corporate accounting is essential. Therefore, the potential value of accounting and accountability in promoting sustainability in public sector organizations has been stressed (Guthrie et al. 2010).

In the public sector, the need for accountability is justified by the greater consumption of resources and their consequent environmental impact, but also by its importance as a role model (Farneti and Guthrie 2009). In this sense, given their size and influence, public entities are expected to lead by reporting their activities to promote sustainability publicly and transparently (GRI 2005).

The emergence of the Reporting Sustainable Development concept (Abreu and David 2013) has led to the gradual incorporation of the social and environmental dimensions into financial reports. These days sustainability reporting tends to follow the guidelines of the Global Reporting Initiative (GRI), which proposes a series of sustainability indicators. In 2005, the pilot version of the ‘Sector Supplement for Public Agencies’ was published to be used by public agencies at all levels of government.

Despite the growing importance of social and environmental responsibility in the public sector, this issue has not been widely addressed by researchers (Ball and Bebbington 2008; Ball and Grubnic 2007). Literature shows there is a lack of empirical research on public social and environmental accounting (SEA) and most studies are largely focused on an Anglo-Saxon context, and more specifically on countries such as Australia, New Zealand and the United Kingdom (Gibson and Guthrie 1995; Burrit and Welch 1997; Frost and Toh 1998; Frost and Seamer 2002; McElroy et al. 2005; Qian et al. 2011). Some studies examine information about social responsibility/sustainability in the public sector, published in the annual reports and/or sustainability reports and recently, on web pages.

Within the Portuguese context, little evidence is available related to public SEA (Ribeiro 2007; Ribeiro and Guzman 2010. Ribeiro et al. 2016a, b and c). In fact, there is no tradition of such empirical research, particularly in the public sector. Thus, our study aims to enrich the international literature on SEA in public entities by providing a snapshot of Portugal’s situation, where empirical evidence is still relatively unknown.

Some studies suggest that accountants are involved in the SEA process in public entities, but there is some room for improvement (Lewis 2008; Williams et al. 2010; Williams 2015). This paper also examines the ways in which professional accountants can encourage and support public entities to increase the low-level of sustainability accounting and reporting practices.

The rest of the paper is organized as follows: the next section presents the accounting framework of the public sector in Portugal; The second section presents an overview of the main regulatory actions related to environmental disclosure not only at the international and European level but also in our country, Portugal. In the third section, we carry out a literature review examining the main lines of empirical research in environmental/sustainability accounting and reporting in public entities. The Portuguese empirical studies were analysed in the fourth section, including their objectives, methodology, samples and main results. The involvement of accountants and the development of regulation/guidelines concerning environmental/sustainability disclosure, particularly applied to the public sector, can play a vital role in the SEA in public entities. Finally, the last section presents a short reflection on the need of revitalizing the accountant’s role to promote sustainability accounting and reporting practices.

2 The Public Sector in Portugal: Accounting Framework

The Portuguese public sector includes the administrative activity of the State- Administrative Public Sector—and its ‘business’ activity, as a producer of goods/services—Enterprise Public Sector (Caiado and Calado 2002).

The Administrative Public Sector treats the subjects of general interest of the country, aiming at the maximum satisfaction of collective needs and not for profit. This sector includes the Central Administration (ministries, etc.), Local Administration (municipalities) and Social Security.

The Enterprise Public Sector may result from the formation of companies by the State itself, with public capital, or may result from legal and political processes, as happened with the nationalization processes, which began after 1974 (implementation of the Republic in Portugal). However, in recent years, the weight of the public sector in Portugal’s economy has declined due to the privatization processes.Footnote 1

Following the commitments undertaken by the Portuguese State under the Financial Economic Assistance Program, there was a need to intensify the control of the Enterprise Public Sector. In this context, Decree-Law nº 133/2013, of October 3, was approved, which created a new regime for the Enterprise Public Sector, which governs the relationship between the State and its companies, pursuing objectives of good management, transparency and control of public finances.

The concept of the public enterprise sector is to integrate the Enterprise Public Sector and the Enterprise Local Sector, including: (a) public enterprises: companies in which the State or other state public entities may individually or jointly exercise, directly or indirectly, a dominant influence; (b) subsidiaries enterprises: where there is a permanent participation of the State.

About the accounting framework of the Portuguese public sector, until the 1990s, the State and its public bodies have relied on the cash accounting. After Portugal’s entry into the European Union, and to modernize the accounting system, there was a process of reform of Public Accounting, with the approval of the Official Plan of Public Accounting (POCP)—Decree-Law nº 232/97 of 3 September. This plan aimed at integrating three accounting systems—budgetary, financial and cost accounting—into a modern public accounting as a tool to support public managers. The POCP was based on the Official Private Accounting Plan (POC) of the private sector, and it moved from a cash basis of accounting to the accrual basis of accounting in the public sector.

However, in a context of globalization, information on the performance and financial situation of public bodies should be comparable. According to the European Commission (2013), the IPSAS are currently the only set of public sector accounting standards internationally recognized that ensures comparability. In Portugal, in 2010, the POC was revoked and the Accounting Standards System (SNC) came into force, based on IASB’ standards (IAS/IFRS).Footnote 2 This regulation was applicable to the public business sector, and the public sector continued to apply the POCP, which made it difficult to consolidate accounts in the public sector.

Thus, the need to implement a system of public accounting normalization was felt, based on the SNC, as happened with the POCP that followed the POC. The Decree-Law nº 192/2015, of September 11, approved the Accounting Standardization System for Public Administrations (SNC-AP)—with entry into force in 2018. In this sense, Portugal has an accounting framework in line with the best international practices in Public Accounting.

However, about the accounting treatment of environmental matters, only the entities that apply the SNC have a standard for this subject—the Financial Reporting and Accounting Standards (NCRF) 26—Environmental Matters, which is part of the SNC. This is an issue neglected by public accounting, particularly by the SNC-AP. In fact, the concern that Portugal always had with the approximation of public accounting to business accounting has not been felt regarding to environmental matters. We do not know the reason for the non-acceptance in the public sector of an accounting standard like the NCRF 26.

3 Social and Environmental Accounting and Reporting Regulation for the Public Sector

3.1 International Initiatives

There are several international initiatives concerning the approval of environmental accounting standards or other guidelines related to environmental disclosure. Even though the International Accounting Standards Board (IASB) has not released any International Accounting Standard (IAS) dedicated exclusively to the treatment of the environmental issues, it presents several IAS that report to this subject (such as IAS 37, 38 and 39).Footnote 3 In the public sector context, the International Federation of Accountants (IFAC) has not published any International Public Accounting Standard (IPSA) either, referring to environmental issues.

At international level, we highlight the Global Reporting Initiative (GRI) that promotes some guidelines towards the elaboration of sustainability reports, with the goal of improving the quality, rigour and usage of the economic, social and environmental information published voluntarily, by private, public and non-profit entities, in all dimensions, sectors and places. This information may assume several configurations, be disclosed in writing, on the Internet and being presented independently (as separated information), or as part of annual reports (GRI 2006). The first guidelines were released in 2000 and revised in 2002. In 2006, the GRI released an enhanced version of the ‘G3’ guidelines and later, in March 2011, an updated version: G3.1. The G4 guidelines were released in May 2013 (Adams et al. 2014).

With the purpose of supporting the usage of these guidelines by several organizations in all sectors, the GRI has developed sector supplements to complement the general guidelines with interpretations that can bear the specificity of each sector and propose a few indicative performance evaluations. In the public context, in September 2003, the GRI began the development of the sector supplement for public agencies,Footnote 4 in response to the need of management for the elaboration of reports, considering that the general guidelines were unsuitable or would not cover some specific aspects, relevant in the public sector (GRI 2004). In March 2005, the GRI published the Sector Supplement for Public Agencies—Pilot version 1.0, meant for the ‘public agencies’ at all governmental levels,Footnote 5 considering that the same supplement may be used by International entities (for example, the Environmental Program of the UN). This supplement may be a starting point for environmental disclosure in the public sector, by providing a general model that favours the comparison between entities and organizations (GRI 2005; CPASR 2005). To sum up, according to the Centre for Public Agency Sustainability Reporting (CPASR 2005), the GRI supplement for public agencies acts upon some new information that is going to be disclosed. Effectively, what separates the public sector from the private one is the need of explaining to all citizens the way how all public policies were elaborated and performed. These public policies are related to the commitment of the public administration to sustainable development, within their jurisdiction.

In our opinion, the trend of the future model of reporting is the Integrated Report (IR),Footnote 6 a single report that should be the organization’s primary report. The core objective of the IR Framework is to demonstrate the relationships between an organization’s strategy, governance and financial performance and the social, environmental and economic context within which it operates (IIRC 2011).

At European level, we underline the Recommendation of the European Commission (EC 2001), referring to the recognition, measurement and disclosure of environmental information in the annual accounts and annual reports of European companies, embraced by the IV and VII Directives, as well as banks, other financial institutions and insurance entities. This recommendation directly follows the document of the Accounting Advisory Forum (AAF 1995) and the Interpretive Communication, by fitting in the EU’s strategy concerning accounting harmonization, considering the different standards from IASB that refer to environmental issues (such as IAS 37, 38 and 39). This recommendation considered by the Directive 2003/51/CE of the European Parliament and Council, of 18th July 2003 (applicable since 2005), that changed Directives IV and VII, in the sense that annual reports of EU’s societies include not only the financial statements of a company but also the environmental issues.

Even though the European Recommendation was not mandatory, it considered the establishment of accounting standards at the national level, so that the State members could follow the guidelines contained in that document. In this sense, different countries such as Denmark, Finland, France, Spain and Portugal have introduced some elements of the European recommendation in their accounting legislation (KPMG and UNEP 2006; Criado-Jiménez et. al. 2008). This recommendation is therefore the main impulse in the normalization process of environmental accounting within the European State members. We highlight that the European Recommendation (EC 2001) does not include public entities.

Concerning the accounting of CO2 emitting rights until the present time, this matter lacks accounting regulation in Europe, as much as in the other continents. Nevertheless, the European greenhouse gas emissions trading scheme, part of the Directive 2003/87/CE of 13th October, plans to establish an accounting to apply to rights of emission. This has led some State members (such as Portugal, Spain, Belgium, France and the United Kingdom) to issue applicable accounting standards on this subject in their geographic contexts.

In the public context, the first initiative at European level to promote the introduction of the environmental accounting belongs to the Parliament of the European Council, which published the Recommendation 1653 ‘Environmental accounting as a sustainable development tool’ in 2004. It was based on the information by the Environment, Agriculture and Territorial Issues Commission, which considers that it is important for State members of EU to get familiar with the term Environmental Accounting and to start (or continue) applying it at all levels of Administration, particularly at local level. This document underlines the importance of introducing Environmental Accounting at all levels of the Government (national, regional and local), presenting a general framework for environmental accounting at European level, in which several standards, international agreements and some experiences in national environmental accounting are reflected, as well as environmental accounting initiatives developed locally. Within these initiatives, we highlight the Italian Project CLEAR, which is the first Italian project for environmental accounting applied to local authorities (Giovanelli 2003).

4 Portuguese Initiatives

Concerning our country, Portugal, the European Recommendation (EC 2001) may be considered the major driving force of the environmental accounting regulation in Portugal. The non-existence of a specific accounting regulation for environmental issues has led the Accounting Normalization Commission (‘Comissão de Normalização Contabilística’) to ensure that the orientations in the EU recommendation should be applied at national level. In this context, the Accounting Standard (AS) number 29—Environmental Issues was approved on 5th June 2002. Another important step in the Portuguese accounting regulation related to the environment was the approval of the Technical Interpretation Number 4—Greenhouse Gas emission rights on 25th May 2006: accounting of emission licences. In the absence of an accounting reference on this subject, Portugal, in accordance to other EU State members, issued this interpretation that is applicable to companies that include the Official Accounting Plan.

However, following the accounting harmonization process in the EU, a new Accounting Standards System (SNC) emerged in January 2010. This reform of the Portuguese accounting system approximated the Portugal accounting standards—the Financial Reporting and Accounting Standards (NCRF)—to the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Related to environmental issues, the NCRF 26—Environmental issues that replaces AS 29 and Technical Interpretation n.º 4 has been published, but its content is identical.

The regulatory disclosure requirements set by the NCRF 26 cover a range of environmental issues (environmental investments, expenses, provisions and contingent liabilities, etc.) and present their definitions, as well as the criteria for their recognition, valuation and disclosure in financial statements.

The NCRF 26 is applicable to the environmental information that is presented in the annual report (individual or consolidated) and in the management report of all Portuguese companies (from the private sector) which are covered by the new Accounting Standards System. Therefore, the NCRF 26 does not apply to financial or insurance entities nor to public organizations, since the accounting normalization is not a competence of the Accounting Normalization Commission. Until now, the Accounting Normalization Commission of the Public Administration has not issued a specific accounting standard concerning the environmental information, so the entities that disclose any environmental information in their accounting documents do it voluntarily.

In Portugal, public entities should submit information for the elaboration of the national accounting according to the European System of National and Regional Accounting (ESNRA) and the aggregated macroeconomics of Statistics Portugal (Ribeiro and Monteiro 2015). We believe that the introduction of a classification by environmental categories in public entities, both in their budget and cost accounting, would not only provide more reliable information, but would also improve the decision-making on the environmental management policies and environmental disclosure.

5 Empirical Research on SEA in the Public Sector

In parallel with the increasing attention concerning environmental issues by organizations and regulators, the interest in Social and Environmental accounting (SEA) amongst academics has grown significantly. In this respect, several empirical studies have analysed the role of accounting connected to business behaviour towards environmental protection.

Nevertheless, despite the overall trend towards increasing research in this area, it is also recognized that the research focused on environmental accounting in public entities is still far from the number of studies about environmental accounting that have been conducted in private companies.Footnote 7 In effect, several authors (Gray and Haslam 1990; McElroy et al. 2005) have stated that our knowledge and understanding of environmental accounting and reporting practices in public organizations is still limited.

However, in the last years, we have attended to the extension of research in the scope of SEA in the public sector (Mathews 1997). Therefore, the number of studies whose object of analysis is the public entities has clearly increased. In this regard, we highlight the studies in the following geographical areas: Australia (Gibson and Guthrie 1995; Burritt and Welch 1997; Frost and Toh 1998; Frost and Seamer 2002; McElroy et al. 2005; Qian et al. 2008; Bowrey 2008; Sciulli 2009), Italy (Marcuccio and Steccolini 2005; Pilcher et al. 2008), the United Kingdom (Gray and Haslam 1990; Ball 2004; Lewis 2005), Canada (Cormier and Gordon 2001), Sweden (Burström 2000; Fortes 2002), Norway (Andersen 2003), Malaysia (Joseph and Taplin 2011; Joseph 2010, Pilcher et al. 2008), Spain (López 2002; Larrinaga and Chamorro 2008), etc. Regarding the type of the public entities that were analysed, most of these studies focused on public companies (Cormier and Gordon 2001; Fortes 2002; Andersen 2003; Rahaman and Lawrence 2001; Rahaman et al. 2004; Larrinaga and Chamorro 2008), universities (Gray and Haslam 1990; Moneva and Martin 2012), protected natural areas (López 2002) and local entities (Burström 2000; Lewis 2005; Marcuccio and Steccolini 2005; McElroy et al. 2005).

Some studies analysed the adoption of environmental accounting practices by public entities obtaining evidence from the postal survey (Frost and Toh 1998; Frost and Seamer 2002) and through case studies (Ball 2005; Moore and Peter 2015; Qian et al. 2011). They observed a limited adoption of environmental accounting practices by public entities.

The motivating factors of the development of environmental accounting practices were also a matter of interest in some studies (Frost and Toh 1998; Cormier and Gordon 2001; Frost and Seamer 2002; McElroy et al. 2005; Qian et al. 2011), which examined several organizational attributes and other factors that could potentially lead public entities to adopt such practices. Most of the times it has been found that the regulatory context (specifically the existence of compulsory environmental reporting guidelines, standards or regulations) and those characteristics related to political visibility (mainly the entity size and the environmental sensitivity of the entity’s activities) have an influence on the development of environmental accounting practices by public sector entities (Frost and Toh 1998; Frost and Seamer 2002; Qian et al. 2008; Qian et al. 2011). It was also found that other internal and external factors influence the extent to which public entities develop environmental accounting and reporting practices, including variables such as location of the entity (McElroy et al. 2005), source of funding (Burritt and Welch 1997; Frost and Seamer 2002), management attitudes towards environmental protection (Frost and Toh 1998), the community’s expectations regarding the local entity’s environmental performance (Qian et al. 2011), the development of environmental management practices (Frost and Seamer 2002) and the complexity of environmental management operations (Qian et al. 2011).

Most of the studies in the public sector focused on social and environmental disclosure practices in annual reports (Gibson and Guthrie 1995; Burritt and Welch 1997; Cormier and Gordon 2001; Frost and Seamer 2002; McElroy et al. 2005; Ribeiro 2007; Moneva and Martin 2012; Mucciaroni 2012; Sciulli 2011), and the main results indicate that: private companies show a major propensity to disclose information than the public ones; the predominant form of disclosure is qualitative and the information of monetary character focuses on environmental expenses and income.

Several studies focus on the Sector Supplement for Public Agencies issued by the Global Reporting Initiative (GRI) in 2005, which contains recommendations on sustainability evaluation based on performance indicators grouped into economic, environmental and social categories. Some studies related to sustainability reporting suggest that: reporting practices are diverse (the documents used for environmental disclosure vary according to the entities) and sustainability reporting increases the visibility (external and internal) of the entity’s activities, its performance and status (Marcuccio and Steccolini 2005 and 2009; CPASR 2005; Mack and Power 2006; Guthrie and Farneti 2008; Sciulli 2009; Sanchez et al. 2011; Tort 2010).

Nowadays, more than ever, information can be provided to a bigger range of stakeholders and interest groups through the Internet (Crowther 2012). Throughout the process of the public sector reform and administrative modernization, some studies (Moon 2002; Brewer et al. 2006) reveal that public entities usually use ICT, on websites, as a means of showing that they have become more transparent through the disclosure of more information about management to citizens (Jorge et al. 2011). Hence, the recent studies have applied methodologies for analysing sustainability information on organizational web pages (Joseph 2010; Joseph and Taplin 2011; Martins 2011; Moneva and Martin 2012; Navarro et al. 2010, 2014, 2016 and 2017; Piltcher et al. 2008, Ribeiro et al. 2016a–b).

The Legitimacy Theory is considered one of the dominant theories in the study of social and environmental information disclosure (Deegan et al. 2002, Mussari and Monfardini 2010; Eugénio et al. 2013 and 2015). In fact, organizations tend to make a lot of effort, through the public disclosure of information, to ensure that their operations are viewed as legitimate. Thus, according to this theory, organizations use published information to be considered acceptable and legitimate by society. However, because community expectations change, organizations should be adaptable, and more importantly, should communicate the changes and develop information strategies in response to the legitimacy crisis they are facing at that time (Dias 2010). Consequently, both the intensity and the approach to information disclosure vary depending on whether an administration intends to increase, maintain or defend its legitimacy.

Rayman-Bacchus (2006) states that government or administration legitimacy proceeds from the consistency of their organizational outputs, societal values ​​and expectations, i.e. the values of the citizens they govern. Legitimacy is reaffirmed throughout the electoral process. Magalhães et al. (2012), argue that trust in government leaders tends to increase when more information is disclosed on government websites, and therefore increases the interaction with citizens.

Several authors consider legitimacy to be the central axis of the Institutional Theory (Deegan et al. 2002; Joseph 2010; Sánchez-Fernández 2012). For Sánchez-Fernández (2012, p. 6), achieving legitimacy involves ‘the fulfilment of rules and beliefs and the adoption of certain organizational practices and strategies that fulfil needs, values and established standards’. Moll et al. (2010) report that researchers in the field of the public sector accounting attribute greater importance to the Institutional Theory than to other theories. The authors argue that this focus is understandable given that public sector entities should demonstrate accountability, and accounting is viewed as an avenue through which public sector entities can legitimize their operations.

Online information disclosure has played a significant role in the public sector, as the approach increases engagement between public entities and citizens. Magalhães et al. (2012: 10) state that ‘it is possible to understand that the adoption of information e-disclosure practices by public sector organizations seems to derive from the mechanisms of isomorphism of DiMaggio and Powell (1983). A public organization may adopt the Internet as a means of financial disclosure by legal enforcement (coercive isomorphism), to resemble other public organizations of the same sector (mimetic isomorphism), or because of the influence that the bodies related to the accounting profession set (normative isomorphism)’.

There are several studies which adopt the Institutional Theory alone or in combination with other approaches, such as the Legitimacy Theory, to explain the implementation of sustainability and reporting practices (Ribeiro 2007; Ribeiro 2016c; Marcuccio and Steccolini 2005; Pilcher et al. 2008; Joseph 2010; Mussari and Monfardini 2010; Lodhia 2010; Joseph and Taplin 2011; Mucciaroni (2012).

6 Empirical Research on SEA in Portuguese Public Entities

In Portugal, as far as we know, the first study on environmental accounting applied to local authorities was developed in Ribeiro’s doctoral thesis (2007).Footnote 8 In the Portuguese context, municipalities are the public entities that are the closest to citizens. The dissemination of social and environmental information by public entities may allow such entities to grow closely aligned with citizens by demonstrating a willingness and ability to serve citizens. This study has been conceived in two different phases, using different research methodologies and objectives:

  • the content analysis of environmental information disclosed in annual reports by the Portuguese local entities in 2004, with the aim of knowing the location, type and extent of environmental disclosure carried out by them, as well as the possible factors that may have influenced such disclosure.

  • semi-structured questionnaire for a sample of Portuguese local entities, in order to obtain data about their situation, regarding the use of environmental management and accounting practices, that is, to know the development degree of such practices and their possible explanatory factors.

The sample of this study included large and medium Portuguese city councils as well as municipal companies belonging to these councils. Generally, the obtained results at the first stage of the study, connected to environmental disclosure in annual reports (in a total of 102 entities, 71 councils and 31 municipal companies, representing 51,3% of the population), reveal that:

  • most entities disclose environmental information, particularly in the management report. This information is exclusively presented in a positive way and mainly with a narrative character.

  • the items about environmental investments, measures of environmental protection, education and training are those which are disclosed by a larger number of entities and also present a larger extension in the annual reports.

  • although most entities disclosing environmental information are city councils, the results indicate that, on average, municipal companies tend to have a greater number of references in relation to the environment when compared to city councils.

  • however, it has not been proved that the type of the accounting plan applied to local entities, as well as their geographical location, are determinants factors of the environmental information disclosed in the annual report by Portuguese local entities.

On the second part of the study, a questionnaire to analyse the use of environmental accounting and management practices was implemented (in a total of 62 entities, of which 51 are city councils and 11 are municipal councils) and the main results indicate that:

  • the financial accounting (85.5%) and the budgetary accounting (75.8%) are the two main areas which consider environmental issues.

  • the management report is the main document to disclose environmental information.

  • the number of entities that deal with environmental costs is limited, which is explained by the fact that only 25.8% of the entities have a cost accounting system.

  • the main reasons that lead entities to disclose environmental information is the need to ensure environmental responsibility through their image promotion.

  • the degree of development of environmental management practices is low, however it is higher in city councils compared to municipal companies. Additionally, entity size, the adoption of proactive environmental strategies and the implementation of Local Agenda (LA) 21 are explaining factors of the degree of development of such practices.

Proceeding with this study in Portuguese municipalities, Ribeiro et al. (2016a) intended to identify the main factors which might explain the degree of development of environmental accounting and reporting practices, based on an Environmental Accounting and Reporting Practices Index (EARPI). This index was created considering a set of eight environmental accounting and reporting practices that could be implemented by the entities included in the sample. Three variables were considered in this study as potential determinants of the development of environmental management practices by local entities, namely the entity size, the Accounting Framework and the degree of development of environmental management practices. The results reveal that:

  • the degree of development of environmental accounting and reporting practices in Portuguese local entities is low;

  • however, municipal companies present a higher degree of development of Environmental Accounting Practices when compared to city councils, once they apply the private accounting plan and consequently the Portuguese Environmental Accounting Standard 26;

  • accounting regulation and the degree of development of environmental management practices are explaining factors of the degree of development of environmental accounting practices in Portuguese local entities;

  • therefore, the hypothesis concerning the influence of the size variable was rejected.

In the public context, it has been proved that the Internet is an important means of communication because of its interactivity and the ability to disseminate information, bringing institutions closer to citizens. Recently, some studies were developed to analyse online information disclosed by Portuguese public entities, because websites are considered an adequate means for studying published information on sustainability. Ribeiro et al. (2016b and c) studies aimed to analyse the extent of online social responsibility (SR) information disclosure by Portuguese municipalities and to identify related determinant factors, based on Institutional and Legitimacy Theories. The sample included the 60 top Portuguese municipalities, based on the efficient use of financial resources (Carvalho et al. 2012). A content analysis was performed on web pages, and it was created an information disclosure index (Total Disclosure Index—TDI) that was subdivided into four subindices: Generic Information (GDI), Economic Information (EcDI), Social Information (SDI) and Environmental Information (EnDI). Several tests have been conducted using previously formulated hypothesis, via univariate and bivariate analyses. A regression model that uses the Total Disclosure Index (TDI) as the dependent variable was also developed. The results reveal that:

  • descriptive statistics indicate average levels of SR disclosure. The Total Disclosure Index (TDI) value was 0.46. The Economic Information subcategory presents the highest value (0.66), followed by the Social and Environmental information categories (0.61 and 0.36, respectively).

  • univariate and bivariate analyses show that certain variables can explain the degree of information disclosure. The Size (SIZE2) (measured by the number of inhabitants), Education Level (EDUC) and Tax Burden (TAX) variables positively influenced all indices, while the Unemployment Rate (UNEMP) variable does not influence the indices. Political Competition (POLCOM) only influenced Environmental Information Disclosure Index (EnDI), and the remaining variables influenced at least four out of the five indices studied;

  • the multivariate analysis results indicate that the implementation of the Local Agenda 21 (LA21), the existence of tax burdens, the characterization of a municipality as an urban one and the environmental/SR certification application positively influence the degree of SR information disclosure. The Total Disclosure Index (TDI) is negatively affected by the existence of an inactive population (i.e. the percentage of individuals ≤ 19 and ≥ 65 years of age).

7 Accountants’ Role to Promote SEA in Public Sector

The extent to which accountants have been involved in environmental reporting practices has been investigated by some authors (Gray et al. 2009; Deegan et al. 1996; Kuasirikun 2005). Williams et al. (2010) mentioned numerous studies that have examined the role of the accountant from a private sector perspective in environmental accounting. However, studies focusing on the role of the accountant from a public sector perspective are limited (Ball 2002, 2005; Telford 2005; Farneti and Guthrie 2009; Williams 2015). The results usually indicate that accountants are not as involved as they could be in the environmental accounting practices of their organizations.

Williams (2015) focused on the accountant’s current and potential role in the sustainability reporting process in the Australian local government, exploring factors that influence the further development of the accountant’s role. Findings indicate that accountants are supportive of involvement in sustainability reporting, but their actual level differs significantly from the level of involvement they believe they should have, pointing to the existence of an execution gap. Potential factors were investigated, highlighting the limited integration of sustainability beyond the organizational level, the lack of understanding of sustainability by accountants and the current need for further upskilling by them. The research has indicated that the public sector accountants have a minimal level of involvement in the preparation of sustainability reports. Burritt et al. (2009) argued that the lack of training, education, knowledge and experience of accounting personnel is acting as an obstacle to the development of sustainability accounting in the public sector.

Williams et al. (2010) argue that accountants themselves need to engage more in issues of sustainability if they intend to broaden their involvement and role in sustainability accounting. This can only happen if accountants are aware, understand and fully appreciate the value of sustainability accounting and reporting.

Lewis (2008) analyses the accountant’s role related to public sector sustainability reporting. According to this author, the accountancy profession has a clear opportunity to play a leading role in developing sustainability reporting in the public sector context.

A report of the Accounting for Sustainability Group by the Prince of Wales (2004) affirmed that it is important for accountants to be aware of sustainability issues in their work. In fact, the accountancy profession has an important role in defining how sustainable development is measured and in influencing how governments report such issues.

The Association of Chartered Certified Accountant’s guide about the role of accountants in sustainability (ACCA 2008), although mainly private sector focused, is also relevant for government and public sector accountants. ACCA (2010) mentions some areas where accountants can contribute to sustainable development and government sustainability reporting: budget and strategy development; audit; performance measurement, monitoring and management; accountability and governance and standards setting. Accountants have skills to understand the regulatory and voluntary reporting environment in which businesses and governments operate, to manage risk; to develop efficient frameworks to measure financial and non-financial information and to provide clear and reliable sustainability information.

8 Conclusion

The international panorama of environmental disclosure is characterized by a diversity of voluntary or mandatory standards/guidelines, which are predominating in the private sector. At European level, only a few countries such as Portugal, Spain, France, Denmark and Finland have included some elements of the European Recommendation on environmental matters in their regulations.

Before the accounting regulations that establish requirements for the environmental disclosure in the annual reports of public entities, the environmental information published has mainly been voluntary. In consequence, it would be primordial to promote environmental accounting legislation in the public sector, not only with the goal of revitalizing the environmental disclosure in the public sector but also to be followed as an example by the private sector.

While research on SEA in the private scope has acquired an even greater importance throughout the last decades (Gray 2006), in the public sector the research has only started to take its first steps. For instance, some countries like Australia are pioneers in the investigation of this matter.

Although several authors (CPASR 2005; Guthrie et al. 2010) have highlighted the need to understand public entities’ current sustainability reporting practices, little research has been conducted in this field (Ball and Grubnic 2007; Guthrie and Farneti 2008; Farneti and Guthrie 2009). Moreover, understanding the determinant factors of public sector organizations to adopt SEA practices may help promote the disclosure of such practices (CPASR 2005; Qian et al. 2011).

The empirical research literature review on environmental accounting shows that most studies concerned to environmental disclosure are particularly focused on private organizations. However, in the last years, we have witnessed an increasing focus on Environmental Accounting research in the public sector. This is highlighted by a further development of empirical studies in the public sector.

Actually, the empirical research of SEA in the public sector is far from reaching the level of research in the field of the private sector. The research on public environmental accounting is limited to a few papers, most of them focused on environmental (and/or sustainability) disclosure practices, although others analyse the environmental accounting practices from an internal perspective. An overview of the empirical literature concerning environmental accounting in the public sector outlines that some of the studies have investigated: (a) the reasons that led public entities to adopt environmental accounting practices as well as their degree of development and; (b) the type and extent of environmental disclosures made by public entities.

In Portugal, although there is some empirical investigation in the private sector, the empirical research including public entities is restricted. As far as we know, there is no tradition of this kind of empirical research in Portugal; there are only a few studies, described on this paper.

Our paper tried to enrich this literature by providing a general overview and analysis of the current state of SEA in Portuguese local entities. In general, evidence indicates that the extent to which those entities have developed social and environmental reporting practices is low. The incidence of such practices is lower in the local sector in Portugal than in other countries, such as Australia and the UK. Therefore, we can conclude that Portuguese local entities are lagging behind other countries in the development of SEA practices. However, we believe that their results can be considered as a starting point for future investigations.

In our opinion, reasons like the lack of environmental accounting regulation in the Portuguese public sector can explain the scant development of the environmental accounting and disclosure practices in the public sector. Thus, this area of interest is lacking appropriate attention from accounting researchers. In this sense, we argue that there is a need to revitalize the empirical research in the environmental accounting field, regarding the public sector, both on the international and Portuguese contexts.

Finally, we consider that the environmental disclosure harmonization requires a concerted work of regulatory entities, accounting and auditing professionals, as well as researchers to get better solutions when elaborating and presenting environmental information, to ensure a bigger transparency and comparability. In fact, we share the opinion of Soloman and Lewis (2002) that the environmental disclosure regulation should be accompanied by an educational strategy, which should include corporate management, stakeholders and professionals’ associations.

SEA is a field which raises challenging issues for the accounting profession: social and environmental accounting and reporting involves a deeper understanding of the interdependence of social, environmental and economic issues; it demands long-term and future-focused accounting practices; and it requires accountants to work alongside other professionals.