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Business and Society Review 105:4 419–435

Expanding Accountability to
Stakeholders: Trends and

he stakeholder concept has transformed the language of
business responsibility by making more explicit the complex
and diverse relationships that firms have with individuals
and groups in society. It is widely accepted today that executives
have to pay attention to the expressed needs and preferences of
many interest groups. Indeed, public policy often institutionalizes
requirements for reporting about and to stakeholder groups. The
prudent executive will also pay attention to emerging concerns and
new groups that may affect public opinion about business practices
and behavior.
One significant trend in society’s expectations of business is the
pressure to report information about the impact that business has
on perceived social problems. The most recent manifestation of this
trend is a move toward addressing stakeholder interests and “total
stakeholder accountability,” which is spurring the creation of stan-
dards, processes, and disclosure requirements for comprehensive
social audits.
This article begins with a brief review of the evolution of account-
ing and reporting to specific stakeholder groups in the United States
and then examines the current movement to set global social
accountability standards. This movement is farther along in Western

Jeanne Logsdon is a Regents Professor at the Anderson School of Management, University of New
Mexico. Patsy Lewellyn is a John M. Olin Professor, Accounting, at the University of South
Carolina Aiken.
*We express our appreciation to Donna J. Wood and Kimberly S. Davenport for their helpful com-
ments and scholarly support throughout this project. We also thank the Alfred P. Sloan Founda-
tion, and Gail Pesyna for partial funding to complete the research.

© 2000 Center for Business Ethics at Bentley College. Published by Blackwell Publishers,
350 Main Street, Malden, MA 02148, USA, and 108 Cowley Road, Oxford OX4 1JF, UK.

Europe, but it is beginning to affect U.S. multinationals and is being

introduced within U.S. business circles. The significance for busi-
ness and for stakeholders should not be underestimated. Total
stakeholder accountability can reduce social conflict and antagonis-
tic business-and-society relations. And it can be good for business
too, if managers see the competitive advantages of early and authen-
tic responses to stakeholder needs and preferences.


The traditional American view of management responsibility resides

in market transactions within a legal framework of private property
rights and contract law. The neoclassical economic model prescribes
management’s role as fiduciary agent for the property owners, the
shareholders. Managers are to make decisions that will increase the
value of shareholders’ property. In free and competitive markets,
this is believed to ideally create optimal benefits for consumers
because managers will have to offer “good deals” in order to sell their
products and services. Contract law exists to adjudicate disputes
when one of the parties to a transaction cannot perform as specified
in the contract. Thus, accountability for customer, employee, sup-
plier, and distributor needs is expected to be negotiated and moni-
tored by the market participants. According to neo-classical
economic theory, the result will be Pareto optimal —every resource
will be allocated to its highest and best use, and every participant
will achieve the best outcome s/he can expect. Such an outcome
meets the ethical principle of utilitarianism.
Because of market failures—markets don’t work perfectly—
the reality of management responsibility for and to stakeholders
has expanded to include specific expectations and requirements.
Many of these are embedded in government regulation that devel-
oped as the result of a crisis or after protracted social conflict
or because of special-interest influence. The following brief
review focuses on rules that have evolved for reporting business
practices about their treatment of traditional market-based and
nontraditional stakeholders—the shareholders, employees, con-
sumers, suppliers (including lenders), local communities, and the
natural environment.1


In economic theory, investors are expected to know or find out for

themselves whatever information is important for them in protect-
ing their own interests. When organizations grow large and the
number of shareholders increases, shareholders elect a board of
directors to oversee the activities of top management and to protect
their interests. However, the economic crisis triggered by the 1929
stock market crash focused attention on the inability of typical
shareholders to know the risks of their investments, and it was
clear that boards of directors were often not able to oversee the
actions of top management in the shareholders’ interest.
The Securities Act of 1933 and the creation of the Securities and
Exchange Commission (SEC) in 1934 put in place governmental
authority to prescribe rules for financial reporting for all firms
that intended to sell shares to the general public.2 For the first
time, companies in general commerce were required to disclose pre-
scribed financial information in a common format, and these
reports had to be audited by an independent party. The field of
“public” accounting evolved to audit financial reports and certify
that they had been prepared according to Generally Accepted
Accounting Principles. An annual report had to be made available
to all shareholders, and a prospectus with specified information
had to be filed before new shares could be issued.
Over the past 50 years, the reality of management control of
information and influence over the board of directors has led to
more specific rules about how investors must be treated and
ever-more-specific requirements for reporting information relevant
to investors and to the operation of competitive stock markets. For
example, a number of rules have been promulgated by the SEC and
in state incorporation statutes about corporate governance and the
rights of minority shareholders. Regulations about reporting stock
transactions by company insiders have also become increasingly
stringent. In fact, the Wall Street Journal has regular reports on
these transactions so that every investor has access to very specific
information about inside trading.


While the traditional economic model specified that employers and

employees would negotiate mutually beneficial labor contracts that
would cover pay, safety, and other working conditions, the reality
often did not satisfy the needs of low-level employees. Particularly
during periods when labor supply substantially exceeded labor
demand, such as during the 1890s and the 1930s, the bargaining
power of individual employees was virtually nonexistent.3 Some
protection of women and children in the labor force was enacted in
some states as part of the Progressive Era reforms in the early
1900s, but little more was done to reduce labor abuses. Agitation
for labor rights occurred over a long period but finally succeeded in
gaining legitimacy in the 1930s. The right to organize was recog-
nized with the Wagner Act in 1935 and subsequent formation of the
National Labor Relations Board.
Labor unions brought greater bargaining power, and the results
involved not only higher pay for union members but also an
increasing range of employee benefits. One of the most important
was and continues to be health insurance for the employees and
their families. Life insurance, disability, and pension coverage also
became a standard part of the union-negotiated contracts in the
1950s and 1960s and then were ultimately extended to most
full-time workers, whether unionized or not. State legislation and
judicial decisions have, for the most part, strengthened employer
responsibility for employee welfare.
In addition to negotiated benefits, employees became protected
under a wide range of government regulations. One of the first to be
enacted at the federal level was the Minimum Wage and Hours Act
in 1938. Unemployment compensation and worker’s compensation
for injuries sustained on the job began to be enacted at the state
level, beginning in the 1930s. Worker safety standards for almost
all employers were authorized in 1970 at the federal level with
creation of the Occupational Safety and Health Administration.
Regular reporting of injuries in the workplace and occasional
inspections were instituted for all but very small employers. Most
recently, advance disclosure of substantial layoffs and plant
closings has become more common with the requirement of at least
60 days’ notice. This is intended to help workers and also

the network of local businesses and small communities that rely

on these large employers.
Fairness to women and minorities in offering employment and
setting wages came under public scrutiny in the 1960s. Criticism of
discriminatory treatment led to significant legislation to require
equal opportunity and equal pay for equal work for all members of
society. The Equal Employment Opportunity Act created require-
ments for reporting data annually on workplace composition for
employers engaged in federal contracting. Job discrimination
against handicapped employees was prohibited by federal contrac-
tors in 1973, and extended to all private employers under the Amer-
icans with Disabilities Act of 1990.


The market encourages responsiveness to consumer stakeholder

concerns when consumers have repeat transactions and competi-
tive choices. But consumers frequently have unsatisfactory trans-
actions, object to business practices, or are subject to involuntary
harms, so both voluntary and mandated business standards
related to safety, information, and quality have emerged during the
past century.
Accountability for product safety has increased exponentially
since the minimal negligence standard of 1900. Higher standards of
negligence and expansion of the right-to-sue were put in place, and
strict liability for harms caused by products is now the
fundamental U.S. norm. Basic requirements for warranties apply
nationwide. Over time too, a number of specific regulations about
particular products, such as automobiles and prescription drugs,
provided minimum protection for consumers.
Disclosure for consumer welfare is widespread. Warning labels
have virtually lost their power because they are so commonplace.
Americans tend to take for granted the availability of accurate con-
sumer information such as weights and measures, ingredients, and
nutritional content, but each of these categories of information was
controversial when mandatory disclosure was initially debated.

Local Communities, Suppliers, and Other

Business Relationships

There is now a widespread expectation that companies will make

positive contributions to the communities where they operate.
Often these are voluntary philanthropic contributions of money,
employee time, and products and services. Executives serve as
board members, advisors, and fundraisers to local nonprofit orga-
nizations and lead United Way campaigns. Companies are gener-
ally eager to disclose information about these activities to support
their claims of being “good corporate citizens.”
For potentially negative impacts on communities, voluntary
responses and disclosure are not sufficient. It has not been
unusual for regulations to be instituted to protect local communi-
ties, including the business members of those communities. This
has been particularly striking in banking. Throughout U.S. history,
rules have been put in place to keep control of savings and banks in
the local community or, at least, within the state because of fears
that there would not be sufficient credit for homeowners, local
farmers, and small business owners. In response to criticisms that
credit was not available in poor neighborhoods and in exchange for
loosening the rules against interstate banking in the 1970s, the
Community Reinvestment Act was enacted to require banks to keep
some lending within the local community and to report annually on
these community loans and investments.4
Commitments to use local suppliers have also been common for
dominant employers and large operations, such as auto plants, but
they usually are not mandated but rather voluntary activities to
maintain good community relations. One notable exception is the
domestic content rules that ensure that more local economic
growth accompanies large investments by foreign-owned firms.
Another is the federal requirement to use a certain percentage of
minority- and women-owned suppliers or subcontractors on large
government-funded projects.
Linking this category to the next one dealing with the natural
environment, it is now required that firms which use or store haz-
ardous materials above certain quantities must report this use to
officials in nearby communities, typically emergency personnel
such as members of local fire departments. While some limits on
disclosure have been permitted to protect trade secrets, the

general norm now is that neighbors and communities have the right
to know of exposure to risk.

The Natural Environment

Firms that produce environmental pollutants or affect the physical

environment have many rules for disclosing their activities. Envi-
ronmental impact statements must be prepared in order to build or
expand operations. Managers must obtain permits and then moni-
tor and report pollution levels for many types of air emissions and
water effluents. A particularly effective use of disclosure has been
claimed for the Toxics Release Inventory, in which quantities of haz-
ardous chemicals above minimum thresholds must be reported to
the federal Environmental Protection Agency. This information is
then made available to the general public. These chemical-level and
plant-level data have been published annually since 1989 and have
been credited with quite substantial voluntary reductions in uses of
the reported chemicals.
Since about 1990, we have observed a growing trend to provide
environmental reports of company operations to the general public.
These are voluntary, at least in the U.S., and are not subject to any
required format or content rules. In fact, they are only very rarely
verified by an independent party. Nonetheless, such environmental
reporting has been hailed as a major step toward a genuine sense of
stewardship. Related to the external reporting of environmental
impacts is the recent development of voluntary ISO-14000 certifica-
tion guidelines. These guidelines focus on the institutionalization of
environmental management systems within firms that want to do
business outside their home countries. Companies that become
ISO-14000 certified will be able to use this designation to become
desirable suppliers and distributors.5

Expanding Accountability

In summary, it is clear that business has been subjected to increas-

ing accountability requirements for impacts on individual stake-
holder groups. This process has been occurring at least since the
1930s in the U.S. Note that these requirements are not substitutes
for market and contract-based accountability. They represent an

additional layer of accountability. Some of these additions, such as

employee benefits, are primarily voluntary, but many others are
mandated by public policy at the federal and state levels.
This brief review of expanding expectations and responsibilities
to an increasing array of stakeholders serves to underscore the
point that business has become so central to human welfare that its
actions are subject to intensive public scrutiny. The intermediary
roles of activist groups, government, and the media are critical in
understanding this shift in business accountability. Issues evolve
through phases of awareness, expression, and mobilization of pub-
lic opinion.6 Public policies result. Firms may participate in these
phases and have some influence on the resulting regulations. But
in a fundamental sense, they do not control the outcomes.


Increasing requirements for reporting impacts on stakeholders

have triggered growth in corporate staff and rising costs to gather,
interpret, and disclose information. New positions and specific
responsibilities within the organizational structure have certainly
made management more complex. Public affairs, governmental
affairs, and community relations have assumed much greater
importance in large corporations, in part because external stake-
holders expect and often require information.7
Operations and line management have also been affected by
growing stakeholder accountability. An example involves process
assessment. Quality management systems were adopted by most
major U.S. companies in the 1980s in response to the successes of
Edward Deming in improving Japanese manufacturing processes.
The systems, often called Total Quality Management, or TQM,
systems, required a business to identify drivers of process quality,
to measure the drivers, and to use the resulting assessment to
improve their internal processes.8 Today, companies widely employ
quality systems and become certified by ISO standards, including
9000/9001 industry standards of quality assurance, and 14000/
14001 environmental policies.
Also, computer technology has changed the capacity for collect-
ing and aggregating information and has provided the capability
to meet growing demands for disclosure. It is noteworthy that

some of the expansion with a stakeholder focus is not regulated,

but instead is embedded in the way that businesses are managed.
For example, managerial accounting has developed a much more
strategic orientation over the past decade. In addition to the tradi-
tional production focus of cost accounting systems, analytical tools
like the Balanced Scorecard are being implemented to link cus-
tomer satisfaction with standard financial performance measures.
Astute organizations see the increasing need for providing infor-
mation to their stakeholders. Over time we have seen a variety of
metrics developed to measure the non-financial performance of
businesses. For example, in the 1980s the TQM movement resulted
in information systems designed to monitor and assess processes
and their improvements. More recently, the Balanced Scorecard, a
framework in managerial accounting that integrates data from sev-
eral stakeholder perspectives (customers, internal processes, capi-
tal providers, and organizational learning), has gained widespread
support within the business community.9 Now we observe the
emerging collaborative efforts to standardize measurement of social
behaviors and report them to the general public. The issue of exter-
nal verification of accuracy has been raised for social reporting, just
as it was for traditional financial reporting.


Social reporting is an effort to aggregate various stakeholder infor-

mational requirements and expectations. Social reporting has its
roots in the early 1940s, and interest was renewed in the 1970s.
Most recently, a vigorous movement has emerged among large firms
in Canada, Scandinavia, and western Europe toward more compre-
hensive corporate reporting.

Emerging Expectations for Social Accountability

Social accounting and reporting embrace the notion that the corpo-
ration is responsible and accountable to the public for its actions
beyond financial performance. The social report, envisioned first in
the 1940s, remained theoretical until attention was renewed during
the 1970s.10 Some large corporations (such as Bank of America,
General Motors, and Migros of Switzerland) began to provide such

reports voluntarily, but the movement lost momentum. Calls for

greater social accountability have re-emerged in the late 1990s con-
currently with the popularity of the “stakeholder” concept. This
trend is predictable, given the history of how information needs and
demands have evolved.
A growing number of companies, large and small, are implement-
ing social measurement and reporting. The Body Shop, UK, was a
1990s pioneer in this arena. It released its first social report to the
public in 1995. A flurry of controversy erupted about the report and
some allegedly intentional misinformation that it contained.11 Such
allegations, criticisms, and skepticism are foreseeable reactions to
new attempts on the part of corporations to communicate with a
broader audience. Following the lead of the Body Shop, other corpo-
rations have publicly released various non-financial performance
reports—Levi Strauss Corporation and Ben & Jerry’s Homemade,
Inc., are notable for their detailed social reports.
Many of the 1970s experiments in social auditing ran aground on
the lack of common standards for content, measurement, and
reporting format. In some cases this resulted in consecutive reports
that were not comparable, generating stakeholder concerns. Migros,
for example, observed in its first report (1976) that there was a large
wage discrepancy between male and female employees. In the sec-
ond report (1978), no comparable measures were included and the
issue was not even mentioned. Employees were distressed and
insisted that management provide the desired information plus an
analysis of the causes and possible solutions to the problem.12
Migros management responded in the third report (1980).
Social auditing in the 1990s has not yet solved the problems of
measurement and reporting consistency and accuracy, but the
mistakes of the past have become opportunities for current learn-
ing and improvement. Lack of consistency in what is measured and
how it is reported has spurred several initiatives toward standard-
ization, and these are discussed in the next section.

Development of Standards

At least three relatively independent initiatives are focusing on the

development of accountability standards. The most comprehensive
effort at this time is that of the Institute for Social and Ethical
Accountability (ISEA). A second effort is the Global Reporting

Initiative (GRI), which is sponsored by the Coalition for Environ-

mentally Responsive Economies (CERES) and emphasizes business
impacts on the physical environment. The third effort, SA8000,
concentrates on developing consistent standards for labor and
workplace practices of suppliers and is championed by the Council
on Economic Priorities Accreditation Agency (CEPAA).
Established in 1996, ISEA’s primary mission is to develop stan-
dards for social accountability that will be widely embraced and
consistently applied. Its agenda prioritizes the development of a
framework for accountability that includes principles, processes,
and process standards for reporting social and ethical behavior.
Also, the organization proposes to develop tools, formats, and indi-
cators for reporting social behaviors, and is in the process of devel-
oping appropriate training and certification of independent social
At its second conference in 1998, ISEA distributed a draft of rele-
vant concepts and terminology. In January 1999, ISEA and the
Association of Chartered Accountants (UK) announced the initiation
of a social reporting award, underscoring the increased visibility of
corporate social accountability. In response to the proliferation of
attempts to develop standards regarding non-financial performance
that have emerged in recent years, ISEA developed the AccountAbil-
ity (AA) 1000 standards and process model, around which existing
and emerging accountability standards can be organized. The expo-
sure draft, distributed in November 1999 and summarized in Table
1,13 also provides for an independent verification process for commu-
nicating social and ethical performance.
The principle of stakeholder accountability (as opposed to share-
holder) is central to the framework for social auditing. In contrast to
financial accounting, which assumes a one-dimensional business
value—wealth creation—the AA1000 framework expands the rele-
vant values to include performance targets relevant to a broad array
of stakeholders, multidimensional assessment of performance, and
extensive communication of results. By focusing on stakeholder
engagement throughout the processes of accountability, the frame-
work is intended to link social and ethical issues to business strat-
egy. That is, by articulating business values that are aligned with
those of stakeholders, management determines the relevant mea-
sures of business performance and creates the information and

TABLE 1. AA1000 Principles

Hierarchy of Characteristics:
Transparency, Responsiveness, Compliance
All Stakeholders
Scope and nature of Meaningfulness of Management of
process information process
Completeness Quality assurance Embeddedness
Materiality Accessibility Continous
Regularity/timeliness Information quality improvement

AA1000 Process Standards

P1-Establish commitment and governance procedures
P2-Identify stakeholders
P3-Define/review values
P4-Identify issues
P5-Determine process scope
P6-Identify indicators
P7-Collect information
P8-Analyze information, set targets, and develop improvement
Auditing and reporting
P9-Prepare report(s)
P10-Audit report(s)
P11-Communicate report(s) and obtain feedback
P12-Establish and embed systems

Source: AccountAbility (AA 1000). Standards, guidelines, and professional

qualification [exposure draft], (London, Institute of Social and Ethical
Accountability) 1999.

reporting system to manage, measure, and report on a broader set

of issues.
A second effort is the CERES Global Reporting Initiative (GRI),
which also released an exposure draft of Sustainability Reporting
Guidelines in 1999. The GRI Reporting Guidelines were created to
standardize the measurement and reporting of non-financial perfor-
mance. More narrow in scope than AA1000, the GRI Guidelines
are currently being “test-driven” by a group of non-governmental
organizations and companies representing a variety of industry seg-
ments, and will be revised in 2000 to incorporate refinements sug-
gested by the pilot study. Several companies have recently released
sustainability reports that are based on the GRI reporting format,
including Bristol Myers Squibb, Procter & Gamble, and General
Motors. In contrast to AA1000, GRI guidelines are substantive and
specific in terms of form and content for reporting on the “triple bot-
tom line,” a term used to define sustainability of business in terms of
financial, environmental, and social performance.14
The third effort to develop accountability guidelines is being
championed by an American organization, the Council on Economic
Priorities Accreditation Agency (CEPAA). Modeled on ISO 9000 qual-
ity control and ISO 14000 environmental management standards,
the CEPAA SA8000 system provides standards for assessment,
monitoring, and influencing social accountability of suppliers and
vendors. SA8000 is a certification program that verifies the exis-
tence of a minimum level of performance in the following areas: child
labor, forced labor, health and safety, freedom of association, dis-
crimination, disciplinary practices, working hours, compensation,
and management. SA8000 certification provides evidence to poten-
tial customers that the vendor/supplier is managing human
resources according to established international standards, regard-
less of geographic location or local social values.
These three standardization efforts are independent and focus
on different specific content, but they are ultimately complemen-
tary. ISEA’s aim is to develop a process standard for social account-
ability that would result in dialogue with all relevant stakeholders
and a means of communicating effectively with them. The
CERES-sponsored GRI is a content standard, analogous to Gen-
erally Accepted Accounting Principles (GAAP), emphasizing what to
report, and how, in terms of environmental impacts. CEPAA’s
SA8000 is a normative standard, promoting a certification program

for suppliers and vendors to verify that suppliers in a company’s

value chain are not seriously violating human rights in the
All of these efforts, like the ISO standards, are voluntary, not
mandatory. Each is important to its particular domain of stake-
holder impacts, and together these kinds of approaches to stan-
dardization are likely to become more common and much more
accepted. By themselves, however, they will not have the impact of
regulatory requirements, and in global business there is no institu-
tion or body that can effectively enforce mandatory requirements.
However, voluntary standardization efforts may create conditions
and pressures among stakeholders that will enhance business’s
social reporting and social performance. And, proactive managers
will become familiar and more comfortable with the implementation
challenges of total stakeholder accountability. Firms will begin to
position themselves as suppliers of goods and services that do not
harm the environment, use child labor, and so forth, and they will
need some accepted source of approval to attest to the validity of
their claims.


As relationships between firms and a broader range of stakeholders

become more developed and commonplace, the nature of their com-
munication might be transformed into genuine dialogue. Current
tools and practices for measuring nonfinancial performance (e.g.,
the Balanced Scorecard) generally solicit input from various stake-
holder groups. We contend that stakeholder groups will be unwill-
ing to participate in one-way communication over the long- term.
Expectations for feedback, influence, and evidence of corporate
responsiveness to social/environmental issues and concerns will
likely increase.
Greater dialogue between business and their various stake-
holders will logically result in greater mutual understanding,
respect, and longer-term commitment in support of mutual welfare.
Greater transparency will likely engender greater levels of public
trust for business. As with disclosure of financial performance,
managers’ concerns about public scrutiny and fears about loss of

competitive advantage are likely to abate as standards and mea-

sures of social behavior become consistent.
Increased dialogue between business and stakeholders, com-
bined with modern electronic communications, will result in accel-
erated learning by external players. No longer able to rely on
traditional marketing campaigns to successfully sway consumer
preference and opinion in the absence of complete information,
companies will face challenges of increasing communication and
information available to and among consumers. Likewise, growing
consumer adoption of information technology will require more
sophisticated business information systems that can respond to
increasing informational demands by stakeholders.
For the general acceptance of measures of social performance
to come about, more sophisticated measures and tools must be
developed. Financial reporting standards evolved in a series of
negotiations and compromises. Similarly, collaboration between
executives, scholars, accountants, and various stakeholder groups
is a desirable incubator within which nonfinancial metrics and
reporting standards can be developed. A good model of such collab-
oration is the diverse expertise represented on the ISEA Council,
where many perspectives and varied backgrounds are being
employed in the development of social accountability standards.
What will likely be the effect on organizations that resist the
movement toward social accountability? It is conceivable that, as
the public comes to expect more and more transparency from busi-
ness, organizations that fail to comply with the informational
demands of their constituents may well risk public criticism, skep-
ticism, and ultimately, loss of reputation. Research on corporate
reputation supports the logical correlation between corporate repu-
tation and financial performance. Companies whose long-term
objective is sustainability should not ignore this link. We have
described an evolution from the classical economic model of the
firm to a stakeholder model. It is not a huge leap to propose that
comprehensive transparency will become a critical competitive
factor for business organizations of the future.


This article is intended to describe an increase in accountability of

business practices with respect to stakeholders. This phenomenon
is not new. It is rather an evolution of increasing expectations and
corresponding competence in accountability. It is hoped that this
article provides scholars and practitioners with a platform for con-
structive dialogue in dealing with changing stakeholder expecta-
tions. Progressive responsiveness is evident. For example, in the
1970s, the idea of environmental accountability seemed both radi-
cal and impossible. In the 1980s, companies in pollution-intensive
industries began to experiment with internal environmental audit-
ing. In the 1990s, environmental measurement had become more
routine, and companies themselves were championing voluntary
environmental reporting to the public.
In the future we predict that the expectations currently being
written into voluntary accountability standards will seem common-
place. The emerging tools of total stakeholder accountability will be
added to the familiar tools of financial measurement after a period
of testing and negotiation. Business would do well to participate
actively and positively in these efforts. The ultimate result requires
the cooperation of firms to achieve sustainability via the triple bot-
tom line—an integration of financial, environmental, and social


1. For a thorough explanation of neoclassical market theory, see LaRue

Tone Hosmer, The Ethics of Management, 3rd ed. (Chicago, IL: Irwin, 1996),
esp. ch. 2.
2. Prior to the 1930s, companies in certain regulated sectors, such as
railroads and public utilities, were required to follow uniform accounting
standards and provide specific financial performance data. Bankers often
required an independent audit of financial data before granting or
extending loans. Stock exchanges encouraged voluntary disclosure of
financial performance. Annual independently audited financial reports
were not required by stock exchanges until 1933 and then mandated by the
Securities Exchange Act of 1934. See John Carey, The Rise of the Accounting
Profession: From Technician to Professional 1896–1936 (New York: AICPA,

1969); also Robert Chatov, Corporate Financial Reporting: Public or Private

Control? (New York: Free Press, 1975).
3. For an excellent explanation of bargaining power disparity and other
rationales for government regulation, see Alan Stone, Regulation and Its
Alternatives (Washington, DC: Congressional Quarterly Press, 1982).
4. Edmund Burke, Corporate Community Relations: The Principle of
Neighbor of Choice (Westport, CT: Praeger, 1999).
5. A recent report on voluntary environmental reporting by corpora-
tions is the KPMG International Survey of Environmental Reporting 1999,
available at For information on ISO 14001,
see Christopher Sheldon (ed.), ISO 14001 and Beyond (Sheffield, UK:
Greenleaf Publishing, 1997).
6. Steven L. Wartick and John F. Mahon, “Toward a Substantive Defini-
tion of the Corporate Issue Construct,” Business & Society 33(3) (1994),
7. James E. Post and Jennifer J. Griffin, The State of Corporate Public
Affairs: Final Report (Washington, D.C., Foundation for Public Affairs,
8. A historical overview of the Total Quality Management movement is
found in Robert E. Cole, “Learning from the Quality Movement: What Did
and Didn’t Happen and Why?” California Management Review, 41(1) (1998),
9. Jeanne M. Logsdon and Patsy G. Lewellyn, “Stakeholders and Corpo-
rate Performance Measures: An Impact Assessment” in J. Logsdon and D.
Wood, Research in Stakeholder Theory 1997–98: The Sloan Foundation
Minigrant Project (Toronto, Clarkson Centre for Business Ethics, University
of Toronto, 2000).
10. David H. Blake, William C. Frederick, and Mildred C. Myers, Social
Auditing: Evaluating the Impact of Corporate Programs (New York: Praeger
Publishers, Inc., 1976).
11. Values Report 1997. The Body Shop International PLC, England.
12. Migros Social Report (1976, 1978, 1980).
13. AccountAbility (AA1000): Standards, guidelines, and professional
qualifications [exposure draft], (London, Institute of Social and Ethical Ac-
countability, 1999).
14. Global Reporting Initiative, exposure draft. March 1999. Coalition
for Environmentally Responsible Economies, Boston, MA. (The final draft
was issued in summer 2000, after this article was written.)