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European Journal of Social Impact and Circular Economy - ISSN: 2704-9906  
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27 

How to resolve audit matters in 
European Affairs? Introduction to a 
sustainable management accounting 
under IAS 37 
Stefano de Nichilo1 

1 Lectures University of Cagliari 
 
E-mail: stefanodenichilo1985@gmail.com 
 
Received: 27/02/2022 
Accepted for publication: 13/04/2022 
Published: 15/04/2022 

Abstract 

Concerns regarding the development of environmental accounting have been around for decades. This work is an update to 
some of the previous questions around the development of ecological accounting to see how this has changed over the last two 
decades. Specific findings from the paper analysis include ecological management accounting, “cost of decommissioning” (IAS 
37) requires a fundamental change to organization management, different values exploring relationships such as corporate 
governance, inclusive of the living and physical world, with a longer time horizon, and a centrality of external factors. 
Environmental accounting is a more commonly used synonym for ecological accounting, though this term is distinct and does 
not cover many of the ecological challenges. In terms of corporate governance, the board of directors (BoDs) is the main 
responsible structure in meeting and safeguarding both shareholders and stakeholders’ interests. Integrated reporting’s primary 
aim is to improve information quality provided to shareholders while responding to stakeholders’ interests and needs. Using 
lenses of stakeholder theory, this study explores the relationship between board of directors’ characteristics as size, gender 
diversity, Return on Decommissioning Asset, outside directors, number of executive committee and, using a self-constructed 
Performance Disclosure Index. Applying a content analysis method, data were collected from integrated reports to determine 
the self-constructed disclosure index. Through quantitative analysis, we analyzed which BoDs’ characteristics are correlated to 
disclosure index. The analyzed sample was formed of 100 integrated reports produced by 27 European members states, 
published on the website for the period 2016–2020. The current study contributes to existing knowledge by exploring the 
voluntary adoption of integrated reporting using quantitative analysis and focusing on the European context. The obtained 
results highlight that integrated report alignment levels is directly correlated with the proportion of outside directors on the 
board and Return on Decommissioning Asset. 

 

Keywords: Accounting; Corporate governance; Ecological; Environmental; Integrated reporting; 
Sustainable development 

 

1. Introduction 
This research sets out to explore how far ecological management accounting; the business community over the last two 

decades has developed an interest in external factors, broadly termed as social and environmental concerns (Van der Stede, 
2012, 2015). The development of frameworks such as Integrated Reporting and narrative reporting guidelines have increased 



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28 

the reporting on and accountability of organizations to these issues (Umar et al. 2020). This paper is exploring how far this 
move has developed in terms of ecological management accounting over the last two decades. This work starts with a challenge 
to the concept of environmentally concerned businesses, drawing a wider ecological view of the issues and business concerns 
(Corvo et al. 2021). In doing so, one central issue is whether the business community can carry on with small changes and 
become ecological enterprises, or whether this requires a significant and fundamental change in organizations to shift the focus 
to achieve a more ecological balance (Alexis 2017). This can be seen as a move towards relationships and away from the 
discrete object system that underpins much of accounting theory. More recently there have been additions to this discussion 
with a subsequent call as to the current state of affairs with sustainability, and the macro picture of ecological catastrophe that 
may be around the corner. The prevailing notion is that businesses have argued all is fine and, that under the term ‘sustainable 
business’, they are tackling environmental concerns (Biancone et al. 2020). This argument can be developed, and several models 
used to explore the permutations. There are some different ways that the environmental issues can be resolved.  

So, an important sub-question is how these do (or do not) cross into the boundary of what can be defined as ecological 
accounting? In the end, is this a reflection on a business and whether becoming more environmental and sustainable is leading 
to an ecological business model and or is this something else? This paper is, in effect, updating this discussion to explore how 
far the notion of ecological management accounting has come over the last twenty years (Birnberg 2000). It is important to 
stress that terms such as environmental and sustainability have become commonly used and synonymous in the business 
community (Biancone et al. 2018). Previous discussions on ecological accounting have highlighted the care that must be taken 
to ensure these terms are not conflated in and with the ecological term and concepts and in exploring this to highlight where 
there are differences and how this is moving forward the discussion and debate on ecological business (Ashraf 2019). Both 
have covered social and environmental concerns in the accounting field over the 20 years but to what extent and specifically 
can this be connected back to the ecological debate? (Hopper & Bui 2016) The difference in this work is that it has a specific 
focus on one topic area, environmental accounting.    

2. Literature Review 

The activity of internal auditors, and the processes and control systems they deal with, are not predicable ex ante and are 
depicted contingently, they cannot rely on a “one-size-fits-all” procedure, but need to be adjusted to the specific context of a 
specific firm at a specific time. That said, management accounting as a discipline is able to identify specific procedures, which 
can better match specifically defined situations in which the organization may be involved (Bocken, Short, Rana & Evans 
2014).  

According to contingency theory, situational factors (or contingent or contextual factors) influence the design of the 
management accounting system, while organizational performance and effectiveness depend on the quality of fit of the 
management accounting system, when designed ad hoc, and the specific situational factors that activated it (Chapman 2006). 
These characteristics of the discipline make it difficult to undertake big numbers-based empirical studies, as each organization 
is unique and the potential situational factors are infinite and nested with each other, while the effectiveness of the fit between 
the management accounting system and the situational factors is often not easily measurable.  

The external environment and its level of uncertainty are relevant situational factors, related to change in the environment, 
which occur unexpectedly, such as the financial crisis of 2008 (Secinaro, Brescia, Calandra & Biancone 2020). When the 
conditions under which the firm operates are more stable, the external environment will be considered as more certain (Eckles, 
Hoyt & Miller 2014). 

On the contrary, dynamic conditions are the premise for an uncertain external environment. It is documented that firms 
operating in a more stable and certain environment adopt a formula-based approach to the measurement of management 
accounting systems effectiveness, whereas firms operating in a dynamic and uncertain environment adopt a subjective approach 
to performance evaluation. In the current situation, a formula-based approach, which presupposes the meeting of targets, will 
easily fail if the uncertain dynamics of the environment make the targets inappropriate. 

Uncertainty is also correlated with the level of sophistication of the management accounting system, given that a certain 
external environment needs only internal, financial and historical information, whereas an uncertain external environment will 
require a more sophisticated management accounting systems, which can also gather information that is external, less finical 
and future-oriented, as well as generally requiring decentralization in the organizational (and decisional) structure. 

The competitive strategy adopted by the firm is also a situational factor, which is able to shape the management accounting 
systems. A low-cost competitive strategy will require a formula-based approach, requiring significant attention paid to cost 



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29 

control mechanisms and frequent and detailed quantitative reports on performance. On the other hand, a differentiation strategy 
will control costs less effectively and be mainly focused on non-financial measures of performance. 

Sustainable destination can then appear in their holistic vision, as integrated, adaptive socio-ecological system (Clarke 1997). 
These are the elements that will be discussed: 

a. destination as an integrated systems; 
b. destination as a social system; 
c. destination as a socio-ecological system; 
d. destination as an adaptive system. 
In this context, the stakeholder theory is also employed to explain stakeholder relationship in business belonging to different 

sectors, including the tourism sector. The theory can contribute to regulating relationship between tourism actors at the 
destination level. In particular, the principles of the theory are considered more significant in the case of destinations involved 
in sustainable tourism development, due to the role stakeholders should play. Indeed, as described in previous paragraphs, 
international and European sustainable tourism organizations consider the involvement and the commitment of all stakeholders 
in planning and in the decision-making process at the destination level as a fundamental step in sustainable tourism development 
(Fischer 1995). 

Many studies aim to identify stakeholder of tourism. Sautter and Leisen (1999), refer to workers, local enterprise, residents, 
tourists, public administrators, competitors, activists and international chains as the stakeholders involved in tourism planning 
at a destination level. Ryan (2002), considering potential stakeholders of an hypothetical tour operator in an hypothetical 
destination, identifies government, travel agencies, local administrators, accommodation enterprises, natural and urban 
environment, workers, brokerage houses and other special interest groups. Currie (2009) considers the Mitchel (1997) 
categories and identifies local indigenous enterprises as dormant stakeholders, fishing and sailing enterprises as discretionary 
stakeholders, the water managing authority as demanding stakeholders, governmental authorities as dominant stakeholders, 
tourism and accommodation enterprises as dependent stakeholders, environmentalists as dangerous stakeholders, and natural 
resources managing enterprises as definitive stakeholders. Byrd (2007) selects the current and potential community and tourists 
as the stakeholders principally involved in sustainable tourism development at the destination level. 

According to the traditional approach, the interests of the three stakeholder groups are incompatible. For example, actions 
aimed at the maximization of business profits could cause damage on the natural environment. Expectations of workers could 
be conflicting with business profit objectives. Environmental associations and local authorities could conflict in the 
management of natural resources. 

However, according to a different perspective, stakeholders interests can be considered complementary. In destinations 
focused on tourism development, and especially sustainable tourism development, business cannot pursue economic goal that 
negate the efforts to safeguard the natural and cultural environment. This is because natural and cultural attractions represent 
the core of tourism products and the most interesting destination features for tourists 

3. Methodology 

Empirical research conducted in order to understand the characteristics of the financial statement disclosure concerning 
decommissioning funds in listed European non-financial companies (significant amounts exceeding 1 million euro of 
decommissioning funds) for the years 2016-2020 for the 27 member countries of the European Union (Stoval,  Higham & 
Stephenson 2019). We voluntarily excluded banks, insurance companies and other financial companies from the analysis due 
to the wide existing regulatory differences and the peculiarities of the typical activities of these companies. 

From the reading of the financial reports it emerges that in the section dedicated to the presentation of the accounting 
principles adopted, the non-financial companies report the letter or in any case the indications provided by the accounting 
standard IAS 37 although only some companies make explicit reference (Baxter & Jack 2008). 

For these reasons, the purpose of the research is to verify how the information contained in the accounting documents is 
managed with the relative level of transparency provided about the characteristics that determine the values of the items in 
question (Currie, Seaton & Wesley 2009) (Table1). 

 
 
 
 
 



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30 

 
 
 
 
Table 1. Data sampling of European business corporation with cost of decommissioning. 
Materiality: substantial amounts exceeding 1 million euros.  

 
European Members 2016 2017 2018 2019 2020 
Austria 1 1 0 1 1 
Belgium 3 4 2 2 2 
Bulgaria 4 3 3 4 3 
Croatia 4 5 4 3 4 
Denmark 2 1 1 1 2 
Estonia 1 1 0 0 1 
Finland 1 1 0 0 1 
France 13 14 17 15 16 
Germany 15 17 23 19 20 
Greece 2 0 0 0 1 
Ireland 3 1 1 0 1 
Italy 12 16 17 20 18 
Netherlands 4 2 2 2 2 
Poland 5 3 2 5 3 
Portugal 6 8 7 6 7 
Czech Republic 3 3 2 2 2 
Romania 3 3 2 3 2 
Slovakia 1 0 0 0 0 
Slovenia 1 0 0 0 0 
Spain 10 11 12 12 9 
Sweden 3 3 3 2 3 
Hungary 3 3 2 3 2 
Other 0 0 0 0 0 
Total Annuals Reports 100 100 100 100 100 
Source: Author’s elaboration on European Commission data set.  

 
 

The quality of the external information regarding the provisions for risks and charges relating to the dismantling of plants, 
the repurposing of sites and reclamations in the financial statements of the 100 listed companies is rather heterogeneous 
(Battaglia 2011). It can certainly be said that if the disclosure required by the accounting principle were expected by the 
companies in a complex manner, there would certainly be an improvement in the level of transparency. Below is an example 
of a summary checklist for the Italian context which highlights the information required by the accounting standard with its 
presence in the financial statements being researched (Table 2). 

 
 
 
 
 
 
 



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31 

 
 
 
 
 
 
 
Table 2. Summary of empirical evidence of disclosure for cost decommissioning: Italy checklist 2016 
 

IAS 37 indications Presence of information 
Yes No 

84. For each class of provisions, the company must highlight:     
a) the book value at the beginning and end of the financial year;   29 0 
b) the additional provisions made during the year, including increases to existing 
provisions; 23 6 

c) the amounts used (ie costs incurred and charged to the provision) during the year; 22 7 
d) amounts not used and reversed during the year; 11 18 

e) the increases in the discounted amounts that occurred during the year, due to the 
passage of time, and the effect of any change in the discount rate. 11 18 

85. The company must indicate for each class of provisions:       
a) a brief description of the nature of the obligation and the expected timing of the 
resulting outlay; 11 18 

b) an indication of the uncertainties relating to the amount or timing of such 
disbursements. Where it is necessary to provide adequate information, the company 
must highlight the main assumptions made about future events. 

6 23 

c) the amount of any compensation provided, specifying the amount of each asset 
recognized for the expected compensation. 0 29 

86. Unless the likelihood of engaging any resource to settle the obligation is 
remote, the company must disclose for each class of contingent liability at the 
reporting date a brief description of the nature of the contingent liability and, 
where feasible: 

    
a) an estimate of its financial effects, 0 29 
b) an indication of the uncertainties relating to the amount or timing of each 
disbursement; is 0 29 

c) the probability of each indemnity. 0 29 
Source: Author’s elaboration 
 

The table highlights the lack of information required by paragraph 86 regarding contingent liabilities. The reader of the 
financial statements cannot be certain either that the company is not exposed to potential liabilities or that these, although they 
exist, are not indicated (Castellani & Sala 2010). 

By categorizing the indications present in the accounting standard, it is possible to reach the following groupings: 
a. indications of paragraph 84: quantitative information expressed with numerical values and through the use of tables. 
b. indications of paragraph 85: information of a descriptive nature that can be expressed in discursive form. 



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32 

c. indications in paragraph 86: information on elements that are not reflected in the numerical values of the financial 
statements. 

This categorization allows us to identify, in summary, how the information reaches a good level of transparency regarding 
the formation and variations of the elements that are represented by numerical values. Lower levels of information concern the 
description of the phenomena that generated the values that feed the financial statements (Bryman & Bell 2007). Finally, an 
even lower level of disclosure can be found in all the elements that are not reflected in the book values. 

Once the results of the empirical analysis have been summarized in an aggregate manner, the understanding of the level of 
transparency in the financial statement disclosure concerning the decommissioning funds can be carried out through the 
construction of a transparency index (Cook & Reichardt 1979). Although it is generally recognized that information 
transparency is an abstract concept, difficult to measure and undermined by the subjectivity of the researcher in the appreciation 
of phenomena, in the context of empirical research the use of these indices is widely used. This is due to the fact that the 
indicators are capable of giving a representation of the observed phenomenon which, although it does not exist in reality, can 
still be appreciated. In order to limit the subjectivity inherent in the choice of variables to be considered in defining the indicator, 
it is considered appropriate to include only the information required by IAS 37 and reported in the paragraphs indicated above 
(Acar & Ozkan 2017). For the study it is considered appropriate to construct two indicators. The first having as variables the 
information required by the accounting standard, each considered with the same importance as the others in defining the level 
of transparency (Corbetta 2003). This indicator allows to minimize the subjectivity of the researcher regardless of any 
consideration regarding the relevance of the researcher's subjectivity regardless of any consideration regarding the relevance 
of each single element. The second considers the same variables but attributes a different weight to each of them due to the 
subjectivity inherent in the sensitivity of the writer (Le, P. T. A. 2019). 

Below is the first unweighted disclosure index used, which is based on the presence of the elements required by the 
accounting standard in paragraphs 84, 85 and 86. 

Unweighted disclosure index 
= 1/11 84a + 1/1184b + 1/1184c + 1/1184d + 1/1184e +  1/1185a +  1/1185b +  1/1185c + 1/1186a + 1/11 86b +  1/11 86c 
The attribution of an equal weight to all variables, although it reduces the subjectivity of the researcher in attributing different 

weights, implicitly assumes that each variable has the same relevance for the reader of the report. This assumption, although it 
may not be completely correct, at the same time it could be less incorrect than the attribution of a different weight to the 
individual variables due to the subjectivity of the evaluator. 

In the doctrine, there are different possibilities for attributing weight to variables. In particular, the criterion of distinction is 
used in two main types: 

a. specific variables of the issuing company, corporate variables, which depend on the choices made by the company and 
which an investor can only become aware of through the information provided by the company; 

b. market variables, publicly available, from which the reader of the financial statements can learn through alternative 
instruments to the financial statements. 

This distinction therefore makes it possible to attribute greater weight to company variables, information that is characterized 
by having the specific company as the only supplier of these elements (Brasini 2010). In the context of liabilities, the elements 
referred to by the accounting principle are characterized by exclusively relating to company-type variables and therefore the 
possibility of distinguishing the weights based on this classification is precluded. It is therefore necessary to identify possible 
solutions in order to distinguish the relevance of the multiple information requested. 

For this purpose, it is possible to distinguish how the information required by paragraphs 84 and 85 represents charges whose 
probability of occurrence is judged by management as high unlike those required in paragraph 86 and relating to charges whose 
possibility of future manifestation is remote. From this point of view, at least double importance can be attributed to the elements 
referred to in paragraphs 84 or 85 with respect to those indicated in paragraph 86 (Creswell 2013). In consideration of the fact 
that the quantitative information required by paragraph 84 may allow the reader to be more aware of the numerical values only 
if supported by an adequate description, it is believed that the information required by the two paragraphs can be attributed the 
same importance. The reasoning illustrated leads to attribute a weight of 0.4 to the information required by paragraph 84, of 
0.4 to that required by paragraph 85 and, finally, of 0.2 to that referred to in paragraph 86 (Cook & Reichardt 1979). At this 
point it is necessary to identify within each paragraph of the weights based on the most basic information required. Also in this 
circumstance it is important to consider the trade-off between desired objectivity and sensibility of the evaluator. Based on the 
assumption that the elementary variables mentioned contribute to the definition of the information transparency of the same 
aspect, it is particularly complex and risky to attribute different weights. 

On the basis of the reasoning described, it is considered reasonable to attribute the same weight to each variable referred to 
in the same paragraph. 



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Weighted disclosure index 
= 4/10 ( 1/5 84a + 1/584b + 1/584c + 1/584d + 1/584e) +  4/10 ( 1/385a +  1/385b +  1/385c) +2/10 (1/386a + 1/3 86b +  1/3 

86c) 
The index reported considers the information required by the accounting standard in paragraphs 84 and 85 as equally relevant 

in the definition of a transparency standard and overall suitable for the definition of 80% of the level of disclosure due to the 
presence of the individual elements mentioned. 

The information required by paragraph 86, due to the remote probability of occurrence, is therefore suitable for defining 
20% of the level of disclosure due to the presence of the individual elements referred to in the paragraph (Table 3). 

 
 
 
 
Table 3. “Unweighted” disclosure index by macro sector: year 2016 

 

Sector 

Average 
paragraph 
84 

Average 
paragraph 85 

Average 
paragraph 
86 

Overall 
average 

Consumer services 0.389 0.000 0.000 0.399 
Industrials 0.323 0.043 0.000 0.363 
Oil & Gas 0.233 0.019 0.000 0.309 
Tecnology 0.183 0.000 0.000 0.189 
Telecommunications 0.132 0.000 0.000 0.189 
Utilities 0.289 0.043 0.000 0.333 

Source: Author’s elaboration 
 
Once the disclosure indicators have been defined as illustrated above, it is possible to quantify the average value of the index 

for each macro-sector, divided between the paragraphs of the accounting standard where such information is referred to (Table 
4). 

 
Table 4. “Weighted” disclosure index by macro sector: year 2016 

 

Sector 

Average 
paragraph 
84 

Average 
paragraph 85 

Average 
paragraph 
86 

Overall 
average 

Consumer services 0.343 0.000 0.000 0.343 
Industrials 0.283 0.059 0.000 0.443 
Oil & Gas 0.256 0.027 0.000 0.283 
Tecnology 0.161 0.000 0.000 0.163 
Telecommunications 0.161 0.000 0.000 0.163 
Utilities 0.253 0.067 0.000 0.319 

Source: Author’s elaboration 
 
The differences in the statistical results obtained from the application of the two different indices are summarized below 

(Table 5). 
 



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34 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Table 5. Results of financial statement disclosure performance index (ID (1;2): weighted and unweighted index: year 2016 
 

Statistical Quantities Weighted index 1 Unweighted index 2 
Average 0.336 0.329 
Std. Dev. 0.019 0.017 
Median 0.343 0.273 

Minimum 0.081 0.091 

Maximum 0.533 0.545 

Q1 0.243 0.273 

Q2 0.443 0.455 
Source: Author’s elaboration 
 

This study aims to outline a modeling system to measure sustainability and the aggressiveness of European corporate 
governance in non-financial companies, concerning activity and analysis of decommissioning asset with environmental issues. 
Hypothesis testing (Table 6) uses the following design sustainability research model:  

 
ID(1;2) = β0 + β1 (Size) + β2 (Gender Diversity) + β3 (RODA) + β4 (Out-side Director) + β5 (Number of Executive Committee) 

+ ξ 
 
Table 6. Framework and hypotheses 
 

Independent 
Variable Previous Studies of Irrituals Rites Expected 

Sign 
Evidence 

Size 

(H1). Companies having larger boards issue integrated reports that 

have a higher alignment level to disclosure index (ID). 

BoDs’ monitoring capacity increases with the number of its 

constituting directors, a benefit that might be surpassed by the 

disadvantages related to inadequate communication and inefficient 

decision-making process, specific for large groups (Andriotis 

2018). After reaching a specific size, the larger the board is, the 

+ 

 
 
 
 

 
 
 
 
 
 



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35 

more ineffective it becomes. A board larger than 7–8 members is 

less likely to function effectively, diminishes its monitoring 

capabilities, and is much easier to be controlled by the CEO. Board 

size positively impacts the integration of various reports, whether 

mandatory or voluntary, influencing ID(1;2) voluntary adoption and 

dissemination of integrated CSR (Jones, Atkinson, Lorenz & 

Harris 2012). Larger boards, being formed of more experienced 

and knowledgeable directors, can deal with integrated report 

preparation, playing a central role in the integrated reporting 

process. Environmental performance and disclosure are higher for 

companies with larger boards, where a larger board increases the 

probability of having the required expertise and diversity to 

enhance environmental performance (DeNichilo 2020c).  

 
 
 
Log(Asset) 

Gender 
Diversity 

(H2). Companies with higher board gender diversity issue 

integrated reports that have a higher alignment level to disclosure 

index (ID). 

BoDs should be composed of an appropriate mix of independent 

directors having relevant knowledge, competence, and industry 

experience to bring a diverse perspective and take objective 

decisions, enabling their preferential access to outside and 

additional resources, broader social networks, and build new 

business relationships (Arena et al. 2010). Board diversity is 

closely related to board composition, as group diversity can 

improve the quality of the decisions in that group, and can be 

referred to gender, age, nationality, cultural background, and 

educational attainment. Environmental performance is higher for 

firms having a board composed of more legal experts and active 

CEOs. Moreover, companies that have a more significant 

proportion of Western European directors record higher 

Environmental Corporate Social Responsibility (ECSR) 

governance mechanisms, while those with a higher number of 

colored directors report a higher quality of the integrated report. 

Companies should disclose their diversity policy (including 

gender, ethnicity, cognitive, and social) regarding senior 

management and board, reporting on diversity with measurable 

+ 

 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dichotomous 
variable (0/1) 



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36 

targets and the progress made (Baltaretu 2011). Regarding gender, 

it is considered that men and women have different moral 

reasoning, women using more care reasoning and protective 

attitudes. The presence of women directors on boards positively 

impacts the integration of various reports, whether mandatory or 

voluntary, while ID(1;2) quality is higher for companies that have 

more women directors.  

Return of 
Decommissio

ned Assets 

(H3). Companies that have a higher profitability of 

decommissioning asset have a lower alignment level to ID. 

The profitability is one of significant determinants of financial 

reporting disclosure of decommissioned assets (DeNichilo 2020 

(a) and (b)). Companies with high levels of profitability of 

decommissioned assets improved influence in investor decision 

and have more interesting stakeholders, so there is a lower 

propensity of performance index ID.  

- 

 
 
 

Return on 
Decommissioni
ng Asset 
(RoDA)  

Out-side 
Director 

(H4). Companies that have a higher proportion of outside directors 

on the board issue integrated reports that have a higher alignment 

level to ID. 

Board composition and independence are closely related, the last 

one increasing with the proportion of independent outside directors 

(Chenhal & Morris 1985). The presentation of CSR information is 

impacted by outside directors, meaning that they have a role in 

ensuring that companies take into consideration the interest of their 

shareholders and stakeholders. Board independence is closely 

linked to independent non executive directors’ presence, which 

should be in the majority. Companies having a board formed in 

majority by independent non executive directors record higher 

levels of voluntarily disclosed information and voluntarily disclose 

more strategic and forward-looking information. Moreover, boards 

formed in a higher proportion of outside directors have greater 

control over management’s decisions and improved monitoring 

effectiveness (Modica 2012). Outside non executive directors are 

more objective and independent when managing and analyzing a 

company’s actions than executive directors, offering additional 

assurance to market participants that their interests are safeguarded 

+ 

 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dichotomous 
variable (0/1) 



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37 

and reducing the agency costs (Stoval, Higham & Stephenson 

2019). The integrated report quality is higher for companies that 

have more nonexecutive directors. 

Number of 
Executive 
Committee 

(H5). Companies that have a more active board issue integrated 

reports that have a higher alignment level to ID. 

Board activity has contrary views an active board with more 

meetings can be interpreted or viewed as inefficient, while others 

believe that more board meetings enable directors to supervise the 

company better (Buckley 2012). By having more meetings, the 

board can debate, analyze, and decide on a broader range of topics, 

including the information included in the integrated report.  

      + 

 
 
 
 
 

Number 

 
Source: Author’s elaboration 

4. Results 

The study analyzes the characteristics and determinants of the sustainability index on investment projects with cost of 
decommissioning. First we see the results of the descriptive analysis of the sustainability model of the projects (Tables 7 and 
8). Next we present the results of multivariate analysis (Tables 9, 10 and 11). 

 
Table 7. Descriptive statistics of independent variables 

Variable Mean Std. Dev Min Max 
Size 25.95 4.25 10.75 44.88 

Gender Diversity 0.44 5.33 0 1 
Return of 

Decommissioned Assets 4.55% 0.99 -17.55% 10.33% 

Out-side Director 0.55 6.55 0 1 
Number of Executive 

Committee 7.88 1.25 3 12 

Source: Author’s elaboration 
 
Table 8. Descriptive statistics ID (1;2) index from 2017 to 2020 

Variable Mean ID1 
Std. Dev 

ID1 
Min ID1 Max ID1 

2017 0.339  0.021 0.081 0.553  
2018 0.411  0.022  0.085  0.552  
2019 0.421  0.024  0.089  0.554  
2020 0.441 0.023  0.082  0.555   

Source: Author’s elaboration 
 
Table 9. Descriptive statistics ID (1;2) index from 2017 to 2020 

Variable Mean ID2 Std. Dev 
ID2 

Min ID2 Man 
ID2 

2017 0.331 0.019 0.091 0.545 
2018 0.333 0.021 0.092 0.549 
2019 0.339 0.023 0.094 0.548 
2020 0.411 0.022 0.092 0.549 



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38 

Source: Author’s elaboration 
 
Table 10. Multivariate analysis of ID (1) model 

Model  Coefficient ID(1) T and P Value 
Intercepts 1.33        1.75*** 

Size 1.55                       -1.09 
Gender Diversity 0.25 1.11 

Return of Decommissioned Assets -1.07         2.22***    

Out-side Director 2.22        2.19*** 
Number of Executive Committee 0.22 1.29 

2017 0.01 

Dichotomous variable (0/1) 2018 0.01 
2019 0.02 
2020 0.02 

R2 0.38 F value 3.33 
Source: Author’s elaboration 
*, **, *** p-value at 0.10, 0.05 and 0.01 
 
 
Table 11. Multivariate analysis of ID (2) model 

Model  Coefficient ID(2) T and P Value 
Intercepts 1.22        2.75*** 

Size 1.45  -1.11 
Gender Diversity 0.22  1.22 

Return of Decommissioned 
Assets -1.15           3.33*** 

Out-side Director 2.44          3.55*** 
Number of Executive 

Committee 0.44    1.22 

2017 0.01 
Dichotomous variable 

(0/1) 
2018 0.01 
2019 0.02 
2020 0.02 

R2 0.59 F value 2.85 
Source: Author’s elaboration 
*, **, *** p-value at 0.10, 0.05 and 0.01 

 
Model 1 is significant (p value 0.01 level) and R2 is 0.38.  
Model 2 is significant (p value 0.01 level), and R2 is 0.59. 
The independent variable that have a significant result (level 0.01) are: RoDA and Out-side Director. 
An optimal solution for anticipating uncontrollable factors and mitigating their dangerous effect may be to rely on 

subjectivity (Power 2009). 
Using objective performance measures can lead to the myopic decision to analyze only what is in the numbers and only what 

was predictable when those objective metrics for performance settled down, which implies the risk of overlooking the relevance 
of some factors that clearly impact on actual performance. Hence, subjectivity could should affect estimates, while forecasting 
and budgeting, at the time of control, may have consequential repercussions for the incentive system of the organization 
(Palermo & Van der Stede 2011). 

Subjectivity in performance evaluations unfortunately impose various criticalities. First, subjectivity is expensive, in terms 
of the time and resources required to assess the evaluation and to investigate the causes of any inefficiency in performance 



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39 

(DeNichilo 2021b). Moreover, subjectivity creates ambiguity regarding its causes and the fairness of the procedure adopted in 
the evaluation, as the evaluation itself may be characterized by a series of biases (Power 2007). 

 
5. Discussion and conclusion 
 
Several themes emerged throughout the analysis, the first is around terminology and its impreciseness and multiple usages 

of terms (Torkington Stanford & Guiver 2020). Of most concern is the concept of sustainability, which is seen as a connected, 
interchangeable, and over-arching concept and, in many ways, has hindered the development of environmental management 
accounting (Freeman 2001). The concept of ecological accounting has not been used to any note in the period since 2000. 
Environmental management accounting is more of a favored term and is positioned as separate from sustainability, this may be 
a clearer way forward (Adams 2020). The use of environmental and accounting can provide a clearer path along which 
environmental concerns and accounting can be developed. Alongside mainstream accounting research that has become more 
aware of stakeholders of the firm, more entities need including in the environmental accounting debates (Adelman 2017). The 
environment cannot speak for itself and operating in an anthropomorphic environment, the concerns and impacts on the 
voiceless entity will be marginalized (Berke & Conroy 2000). The environmental entity must be central to any debate on 
ecological development. This means starting with the impact on the environment and working backwards to the organization 
changing the emphasis allows a clearer ecological standard to be established and not seen as a nice add on (DeNichilo 2021a).  

The traditional accounting discipline was settle with the aims of disclosing information on the organization, moving certainty 
and reliability about business contracts towards the business community. The postmodern view of management accounting 
discipline clarifies that the certainty of contracts in the business community is hardly believable. The best way to maintain 
environmental uncertainty is to smooth over the information and the requisites for the accounting of failure. Accordingly, 
discussions on the organizational performance should move from statements of what happened towards projections on what 
will happen, supporting the reliability of traditional management accounting systems with a forward-looking strategy of “as-
if” planning, thus evolving risks into opportunities. 

Finally organizational should equilibrate the instruments adopted to control uncontrollable situational factors and adequately 
combine objective and subjective instruments for management accounting. Excessive reliance on objective performance metrics 
leads to business as usual, while new opportunities are missed out on. While, in business life nowadays, there is no room for 
demonizing objective metrics and relying on a purely subjective approach to evaluations, which would likely be affected by 
hidden pitfalls and side effects, there is a general call to avoid myopic evaluations and look at performance dynamically, with 
a continuous approach to management accountants’ role as risk mitigators, while considering risks and financial distress as 
facilitators for turnaround activity, which is positively centered on innovation. 

Further development of these accounting approaches, with an awareness of the factors impacting on the development of 
ecological accounting, will help shape the development of ecological management accounting into the near future.  

 

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