1. Environmental accounting in China – the influence of accountants’ philosophical values
John Margerison, De Montfort University, Leicester, UK jmargerison@dmu.ac.uk
Abstract
This paper seeks to analyse a set of eight exploratory interviews with Chinese accountants in Shenyang
and Shanghai in April 2010. These interviews sought to establish the environmental policy and
environmental accounting in place in their organisations. They also sought to examine the accountants’
personal philosophical values, to see if there is any possibility that these values could influence
organisational environmental policy and environmental accounting initiatives.
Although it was found that the accountants in general had enlightened personal philosophical values on
environmental matters – some based specifically on traditional Chinese philosophy – these accountants’
values were not influential at an organisational level in terms of the environmental policy or
environmental accounting. Instead the following influences were identified: government, sector
scandals, markets, Western parent companies’ values. Encouragingly, only one of the eight interviewees
mentioned the business case as a driver for environmental accounting.
Acknowledgement
The research interviews in China on which this paper is based could not have been carried out without
the help of Wang Yingying of Liaoning University in Shenyang and Dr Mingchuan Ren of Fudan
University in Shanghai. Sincere thanks to both of these academics for their ongoing help and assistance.
Paper
Introduction
This paper seeks to make an original contribution to the knowledge about environmental accounting in
a Chinese context. It seeks to explain for the first time the ways in which Chinese accountants formulate
environmental accounting responses/practices/mechanisms and the influences over their work (in
particular philosophical influences). It is hoped that it will stimulate debate about the need for
environmental accounting responses to be developed and foster better understanding that such
responses are culturally distinct in different countries (using China as an example) (Lewis and Unerman
1999).
Environmental accounting is defined for this paper using the Society of Management Accountants of
Canada definition (Epstein 1996):
“....the identification, measurement and allocation of environmental costs, the integration of these
environmental costs into business decisions, and the subsequent communication of the information to a
company’s stakeholders....Measurements might be quantified in physical units or monetized
equivalents.”

2. Research on influences on the development of environmental accounting has mainly taken a Western
perspective and focused on environmental impacts or broader social accounting in countries such as
USA, UK, Germany, Portugal, Australia and New Zealand (see (Adams 2002) as an example). The key
influences identified link to legitimacy and institutional theory and include regulatory pressures (Deegan
2002; Holland and Foo 2003; Cho and Patten 2007).
Recent Chinese research on disclosure by Chinese companies of environmental accounting information
(Zhang 2010) presents a pessimistic view: that there is a lack of concern by government and the general
public about such disclosure. The suggestion is made that investors tend to invest in any business which
will bring high profit and to ignore environmental effects. Zhang recommends that: the idea of Green
investment should be advocated; naming and shaming of heavy polluters; a national database of
environmental reports of companies; and, pressure on companies to publish environmental accounting
information voluntarily. What Zhang’s work does not attempt to do is assess the extent of unpublished
environmental accounting information. This paper also attempts to address this in its questioning of
Chinese accountants about the environmental accounting in their organisation rather than the reporting
thereof specifically.
(Rowe and Guthrie 2009) examined the influence of institutional cultural norms on Chinese corporate
environmental reporting and outlined the influence of Confucianism in this sphere. However, their
research was carried out in 2002-2005 during a period of minimal reporting. This paper aims to extend
and develop their findings in a period of increased environmental accounting and reporting activity (as
evidenced from recent studies e.g. (Guo, Zhong et al. 2008).
Existing research and scholarship suggest that the central strands of Chinese philosophy (Taoism,
Buddhism and Confucianism) have strong links to ecology in their ideas (Berthrong 2003; Miller 2003;
Sponsel and Natadecha-Sponsel 2003). Many researchers and commentators suggest that these
philosophies are very influential in Chinese life today (see (Bell 2008). However, this researcher has
found that discussion of these influences tends not to be based on empirical research, with many
unsupported statements being made e.g. (Wang and Juslin 2009). This paper, and the research that it is
based on, aims to examine these philosophical influences in the practice of environmental accounting in
China.
Methodology
The research on which this paper is based (and offers some preliminary insights) works from a social
constructionist perspective (Easterby-Smith, Thorpe et al. 2008) in that environmental accounting is
seen as socially constructed and given meaning by people (Birkin 1996). It is both deductive and
inductive in approach, moving from theories such as legitimacy and institutional theory to see what
influence they have on environmental accounting practice in China; but also reflecting, via interviews,
whether it is possible to develop a new theoretical basis to explain the responses received. Overall an
interpretive (as opposed to positive) epistemological stance has been taken.

3. A case study methodology has been employed with accountants from eight different organisations (see
Appendix 1 for a summary of the organisations) in two industrial cities - Shenyang and Shanghai – being
interviewed using a semi-structured interview schedule (see Appendix 2 for the schedule used). The
interviews were carried out where possible in English, but in all cases an interpreter was used (a Chinese
accounting academic who was sympathetic to the aims of the research). As the interviews were usually
carried out away from the workplace in cafes and restaurants it was not possible to record them and the
researcher had to content himself with notes taken during the interview and written up in detail after
the event. In all cases the interview transcript was checked by the interpreter for accuracy. In several
cases the interviewees (who had been briefed on the purpose of the interview beforehand) brought
with them corporate literature and other information that was useful in the research and this has been
incorporated into these findings.
Analysis of interviews
1. Environmental accounting in the interviewees’ organisations
A common feature of environmental accounting in most of the organisations was the accounting
to the government – in China represented by the Provincial or State Environmental Protection
Agency (SEPA) – so that a report could be made annually on environmental impacts and the
relevant levy paid to the government. In the case of the animal feedstuff manufacturer the
annual levy or taxation was in the region of 100,000RMB (approximately £10,000) for a small
business unit involved with pigs. The government official in Shenyang talked of RMB 1 billion in
levies paid to the SEPA at provincial level (Liaoning Province) in 2009.
No other common themes emerged from the interviews but a number of interesting
environmental accounting activities were described: information on costs involved with waste
water treatment; measurement of pollution related costs of new factories in business planning;
identification of costs of equipment recycling; estimates of remediation costs associated with
incineration plants with associated liabilities; accounting and reporting on bottle recycling
projects; measurement of energy reduction initiatives and the reporting thereon; detailed data
generated on energy usage and pollutants. As can be seen, in most cases the accountant
interviewed could identify environmental accounting activities in addition to the reporting
around the SEPA levy. Only in one case (the dairy company) did public reporting of the
environmental accounting information take place (and that only in newspaper reports with
minimal quantitative information disclosed). So the contention from these interviews is that
Chinese organisations are “doing” environmental accounting but to a large extent they are not
going public on this.
2. Organisations’ environmental policies and underlying philosophy
Most of the organisations had laudable policies to reduce pollution and emissions; also to
minimise energy use. One company’s clear policy was formulated into four words: “respect,
responsibility, reduce and recycle”. A recurrent theme was that the policy reflected what
government required and did no more. Government was seen as the arbiter of environmental
standards and the companies followed these standards. In terms of an underlying philosophy,
no mention was made of traditional Chinese philosophy, with statements such as: “outside,

4. inside, whole society, sustainable development of China”; “seeking to maximise social benefit
from our activities”; suggesting a strong tendency towards communist philosophy in the official
pronouncements of the organisations. One interviewee said that his organisation was motivated
by the market and followed the practices of competitors and responded to the demands of
customers (this equates closer to institutional theory and mimetic isomorphic activities).
3. Accountants’ personal philosophical ideas about environmental matters
If the organisations’ philosophies could only be equated with communist philosophy, it was
interesting to see whether there were parallels in the philosophies of the accountants
interviewed, and the extent to which their personal philosophies appeared to be influential in
the organisations’ policies and environmental accounting activities.
Personal philosophies were rationalised down to: “a strong desire to keep the earth beautiful”;
“if you want to do things – do good deeds”; “the environment is important to everybody and
needs protecting”; “human beings should live harmoniously with Nature”; “Nature will punish
mankind if yin and yang are not kept in harmony”; “we must preserve the environment for our
children”; “Nature must be respected”, “I would stress the harmony between humans and
Nature from ancient times”.
In these personal philosophies there are strong parallels with the ecological thinking in the three
central strands of Chinese philosophy: Buddhism – aspiring to oneness with the natural
environment (Sponsel and Natadecha-Sponsel 2003); Daoism – ideas of the harmony between
heaven, earth and humans (Miller 2003); Confucianism – human flourishing can only take place
within the larger matrix of Nature (Berthrong 2003). However, only three of the interviewees
could be drawn into identifying one of these philosophies (one Buddhism and two Taoism).
Another of the interviewees mentioned the influence of Feng Shui that he had learned from his
father, particularly in terms of humans’ position on the Earth. Almost all the interviewees
acknowledged ancient roots to their philosophies. Certainly it can be concluded that all the
accountants exhibited enlightened personal philosophical values on environmental matters and
that these were almost all rooted in ancient Chinese philosophy.
4. Linking personal philosophies of Chinese accountants with their organisations’ environmental
accounting and environmental policy
In this part of the research the findings are affected by the fact that the interviewees were
selected only to be Chinese accountants working for Chinese based organisations (mainly
companies). No prerequisite for selection was that they were involved in their organisation’s
environmental accounting and environmental policy. In fact only three of the interviewees
identified themselves as champions of environmental accounting in their organisations. Of these
there seemed to be a separation of personal philosophy from that of the organisation and no
acknowledged link between personal philosophy and environmental accounting activities. In the
cases of the five interviewees who did not identify themselves as champions of environmental
accounting (or in fact having any involvement in environmental accounting) presumably their
personal philosophy on environmental matters cannot have had any influence on the
organisations’ environmental accounting.

5. 5. Other influences on environmental accounting
Government: Already discussed in terms of environmental reporting is the accounting for and
reporting of environmental impacts to SEPA at provincial level. This was mentioned by all the
interviewees to some extent. In particular one interviewee said that the policy on environmental
matters was shaped by the requirements of SEPA. As this research progresses it is intended to
interview officials from SEPA and to analyse its own reporting and hopefully that of the
companies that report to it. The extent to which the relationship of organisations with SEPA
parallels that with companies and government departments in the UK will also be examined, to
try and establish whether the relationships in China have a particular flavour that may provide
models for other countries to follow. Another interesting feature of government is the apparent
benevolent nature of government in China – this is strongly influenced by and derives from
Confucian thinking (Dao 1996) and is worthy of further examination.
Another strand of government influence is the Ministry of Finance (MOF). One interviewee said
that at present there are no MOF accounting standards on the accounting for and reporting on
environmental impacts. The implication was that if the MOF standardised this area then
companies would be forced to follow the standards. This research will seek out accounting
standards in this area from around the world to see if there is a model for China to follow.
Sector scandals: The dairy company interviewee referred particularly to the recent scandals in
China (mainly around the poisoning of babies drinking factory produced dried baby milk). He
was at pains to assure me that his company was not involved in these scandals and that the
company went to enormous lengths to ensure that its products were clean and healthy without
pollutants. This company was the only organisation of the eight to be involved in reporting on its
environmental activities – via national newspaper and staff communications – and the
interviewee was very interested to know how the company could be more proactive in this area.
In this case legitimacy theory (Deegan 2002) seems to come into play as a way of explaining the
proactive behaviour of this company in a sensitive industry which has recently been beset by
scandals. The company seeks to legitimise its activities through environmental reporting based
on environmental accounting data.
Markets: Several of the interviewees stressed that companies in general were profit seeking and
that it was the role of the State to ensure compliance with environmental regulations rather
than voluntary compliance by companies. This suggests that the market is a not a strong driver
towards environmental accounting and its reporting. However one interviewee stressed the
business case for, for example, energy use reduction and control over pollutants. Customers
produced standards for the company that it had to follow if it wanted to remain an approved
supplier. This interviewee described this as the company being a market follower.
Western parent companies’ values: Two of the organisations involved in this study were
Chinese foreign owned enterprises. One of these interviewees stressed that: “the mother
company has a strong philosophy on environmental matters so that a no pollution policy is

6. written into our Articles of Association”. The other interviewee stated that the US company
culture is a driver for her thinking and the behaviour of the Chinese enterprise on environmental
matters. This suggests that organisations with strong ownership links to Western parents may
be more environmentally aware and have policies that reflect Western values. This researcher
has also in an earlier research study interviewed the Chinese subsidiary of a major shipping and
transportation company with its parent in Denmark. This interview pointed up a number of
features of the company’s social and environmental operations that seemed to be influenced
strongly by the values of the Danish parent. It is intended to further pursue this as this research
progresses.
Conclusions
This paper attempts to draw together several strands. The first strand is traditional Chinese philosophy
which is often said to be highly influential in the lives of modern Chinese people. The second strand is
the ecological thinking within the modern interpretations of the ancient philosophies. The third strand is
the modern phenomenon of environmental accounting. It is hypothesised that if traditional Chinese
philosophy is so influential and if it has strong ecological ideas in its thinking then it will influence the
practice of environmental accounting by modern Chinese accountants.
In attempting to test this loose hypothesis eight Chinese accountants were interviewed from eight
different Chinese based organisations (mainly companies). These interviews were exploratory in nature
and represent only the beginning of a bigger project extending over several years from now. The
interviews were based on a semi-structured schedule of questions and allowed for digressions by the
interviewees. The interviews were conducted with the help of Chinese academics who acted as
interpreters in all cases – even where the interviewee could manage most of the questions in English.
The interviews were carried out in Shenyang (4) and Shanghai (4) – both modern industrial and
commercial cities and therefore in no way representative of China as a whole but only of the cities of
the Eastern seaboard.
Although it was found that the accountants in general had enlightened personal philosophical values on
environmental matters – some based specifically on traditional Chinese philosophy – these accountants’
values were not influential at an organisational level in terms of the environmental policy or
environmental accounting. Instead the following influences were identified: government, sector
scandals, markets, Western parent companies’ values. Encouragingly, only one of the eight interviewees
mentioned the business case as a driver for environmental accounting.
The research carried out to date has shown that it is possible for a Western academic to carry out
interviews in China and paves the way for more fruitful and in-depth interviews to be carried out, along
with surveys of the extent of environmental accounting and its reporting in China. The interviews have
pointed up the fact that it is extremely difficult to detect links between traditional Chinese philosophy
and the practice of environmental accounting in China – but should this difficulty preclude further
investigation of what is a most interesting and unique feature of Chinese culture.

7. APPENDIX 1
Summary of organisations from which data gathered for this paper:
Location Ownership Industry Employees in China
1. Shenyang Chinese company – part
of German multinational
Engineering 200
2. Shenyang Chinese owned Automobile parts 65
3. Shenyang Chinese owned Animal feedstuffs 5,000
4. Shenyang Provincial government
department
Finance 9 (30,000 in the
provincial government)
5. Shanghai Chinese owned Building 500
6. Shanghai American owned
enterprise
Engineering 100
7. Shanghai Chinese owned Dairy products 20,000
8. Shanghai Chinese owned Electronics 4,000
APPENDIX 2
Interview Schedule
Questionnaire for Chinese accountants in Shanghai and Shenyang
Group 1 questions (the interviewee – background information)
Position held
How long in that position
Previous position
Qualifications
Date started work
Group 2 questions (the company)
Industry in which company operates
Size of company (number of employees)
Environmental policy of the company
Philosophy underlying environmental policy
What environmental accounting does the company do
Management accounting (budgeting and costing)
Project appraisal
Financial accounting and reporting
Ecological accounting and reporting
Group 3 questions
Are you involved in any of the environmental accounting?
Are you a champion of environmental accounting or are you merely doing what you are told to do?
Does your personal philosophy of life influence you in your environmental accounting work?

8. Include in question on personal philosophy – Buddhism, Daoism, Confucianism, Feng Shui,
Socialism/Communism, Western influences.
What is your view on the position of humankind in relation to Nature? Are humans at the centre of the
universe?
Should Chinese companies do more in the environmental accounting area?
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