1-s2.0-S0361368296000372-main.pdf

Pergamon
Accounting, Organizations and Society, Vol. 22, No. 2, pp. 123-146, 1997

c 1997 Elsevier Science Ltd
Au rights reserved. Printed in Great Britain

0361.36B2/97 $17.00+0.00

PII: SO361-3682(96)00037-2

EXPERTISE AND THE CONSTRUCTION OF RELEVANCE: ACCOUNTANTS
AND ENVIRONMENTAL AUDIT*

MICHAEL POWER
London School of Economics and Political Science

Ahtract

Some accountants have begun to compete for work in the environmental auditing field and this essay
describes the strategies by which they have attempted to represent themselves as relevant experts. A shift
in regulatory style has stimulated experimentation with new instruments of control, including voluntary
schemes for environmental auditing which emphasise a management control system. Subsequent
attempts to define the relevant knowledge base of environmental auditing and to accredit verifiers have
created a stage on which accountants can promote their claims. The essay draws attention to the
construction of an overlap between the skills required for financial and environmental auditing. In turn,
this strategy requires that other forms of expertise, such as in the field of the applied sciences, must be
subordinated within an audit process which is controlled by the accountant. 0 1997 Elsevier Science Ltd.
All rights reserved

Environmental auditing has many similarities with
traditional auditing and the auditor has a long standing
tradition of investigating and evaluating systems as
well as reporting the Endings. It would therefore be
expedient to take the auditing profession’s experi-
ence and methods as the point of departure. (Danish
Auditing Profession quoted in FEE, 1993, p. 38)

the financial auditor can play a role in environmental
auditing but possesses only one element of the
required knowledge, skills and experience needed to
carry out environmental audits. (FEE, 1993, p. 13)

The term environmental audit.. is widely misunder-
stood as being akin to statutory financial audit. (ICC,

1991, p. 4)

The economic success story of accountants,
and of the large accounting firms in particular,

has had much to do with their ability to expand
into new areas of advice and mediation from a
traditional base in auditing, tax and insolvency.
In doing so they have succeeded, so far, in
managing “shifting processes of commercial-
ization” (Radcliffe et al., 1994, p. 602) and in
maintaining “a coexistence between the
ideology of public service and the logic of
profit” (Dezalay, 1995, p. 341). In this way,
accountants have become powerful social
actors who, far from performing merely calcu-
lative and verificatory services, increasingly
shape “the whole apparatus of intervention”
(Dezalay, 1995, p. 338) across a wide range of
activities and organizations. And corresponding
to their role in mediation, accountants in the
UK have also assumed a dominant position

*An earlier version of this paper was presented at the Interdisciplinary Perspectives in Accounting conference, Manchester
University, July 1994. The author is grateful for the comments of Jim Haslam, Christopher Hibbit, Anthony Hopwood,
Christopher Humphrey, Richard Laughlin, Peter Miller, Christopher Napier and two anonymous referees. The financial
support of the Research Board of the Institute of Chartered Accountants in England and Wales is also gratefully
acknowledged.

123

124 M. POWER

within management hierarchies at the expense
of other forms of “control know-how” (Arm-
strong, 1985).

One consequence of this success is that it has
now become difficult to define precisely what
an accountant is other than trivially in terms of
membership of a professional body-which is
in any case fragmented (Willmott, 1986; Sikka
& Willmott, 1995, p. 550) and ill-defined (Kirk-
ham & Loft, 1993, p. 508). While the set of
auditors is becoming institutionally defined in
Europe by virtue of statutory registers, the
category of accountant remains problematic
and diffuse, covering many areas of work in
industry as well as public practice.’ The large
accounting firms have become internally
diverse and it no longer makes any sense to
regard them as speaking with one voice on the
question of accountants’ claims in different
fields of work.2 In short, the boundaries
between what is and what is not accounting are
no longer, if they ever were, Iixed. Indeed, the
“contemporary expansion of accounting prac-
tice is in many ways a return to its rather mixed
origins” (Radcliffe et al., 1994, p. 624).

Despite this complexity, we should not be
blind to the strategic and rhetorical potential of
the category of “accountant” and related terms
in articulating and promoting claims of com-
petence in new areas of work, even when these
new areas have an uncertain economic potential.
As Jasanoff (1987, p. 199) puts it, “boundary
defining language” and ‘new conceptual
categories” make possible the extension of
interests into new or enlarged fields of work.
An economic interest in a new area of work is
not even a sufficient condition for establishing
credible and legitimate claims to work in that
area. Bather, market competition must be sup-
ported by a form of interpretative competition
in the form of claims to expertise. This is espe-
cially so where the nature of the market and the
competences to operate in it are ill-defined and
immature. In such circumstances, even the

driest and most procedural elaboration of prac-
tical guidance is not simply neutrally descrip-
tive; it is part of a wider normative discourse
which constructs and presents the field in ways
which make it receptive to the claims of a
certain form of expertise rather than another.
This means that the control of professional lan-
guage in official documents, conferences and
committees is a vital resource in jurisdictional
competition (Abbott, 1988, p. 139). As Kirkham
and Loft (1993, p. 508) have put it, “professio-
nalization projects have discursively deployed
concepts of difference and similarity.. . as a
basis for inclusion and exclusion.” Hence, ways
of talking about a practice are an important
feature of the practice itself.

This essay is concerned with the various
representational strategies by which the rele-
vance of accountants and accounting based
expertise has been promoted in the context of
emergent markets for environmental auditing.
It should be emphasised that the analysis is
about claims to legitimate competence in the
environmental auditing market, not the market
itself which is still developing. The environ-
mental auditing field provides an example of
how accountants and their representatives can
articulate claims to competency in an area of
work with which it may not be natural or, from
some points of view, desirable to associate
them. There has been much debate within
industry about what environmental audits
“really are” and in an attempt to bring greater
determinacy to a diverse range of practices,
regulatory attention has increasingly focused on
the expertise base of environmental auditing
practitioners. But environmental auditing
know-how is not merely a question of seman-
tics which can be resolved by better definitions
of the practice. Such definitions are often the
product of interpretive strategies to promote a
relevant knowledge base which can be repre-
sented as overlapping with, and sufficiently
similar to, other practices and skills. In the

’ For example, in Germany, it is not possible to talk of an “accounting” profession in the same way as the term is used in
the USA and UK.

2 Recent controversy in the UK concerning the establishment of a tax faculty within the ICAEW is a case in point.

ACCOUNTANTS AND ENVIRONMENTAL AUDIT 125

blurred boundaries between different sources
of expert authority, questions of technical con-
tent and the jurisdictional aspirations of experts
go hand in hand.

In the next section I consider specific regu-
latory initiatives in environmental audit, initia-
tives which reflect a broad shift in regulatory
style. Questions of competence and knowledge
in the environmental audit field crystallise
around the function of independent verification
of system operations. I argue that discursive
competition with applied scientists and lawyers
has as much to do with preserving hierarchies
as with jurisdictional expansion. Although
accountants’ claims to expertise in indepen-
dent validation provide a conceptual bridge
between financial and environmental auditing,
the crucial issue is that of task orchestration.
Finally, the strategies of accountants to establish
lead expertise are considered in terms of: the
similarity and difference claims which they
advance; the role of audit as an abstract body of
knowledge; and the subordination of science
to accounting. Overall the paper suggests that
the relevance of expertise in the environmental
audit field is subject to competing construc-
tions which seek to link it to established forms
of practice (e.g. Coopers & Lybrand Deloitte,
1990, 1991).

THE RISE OF ENVIRONMENTAL AUDIT

It is no longer possible, if it ever was, to distin-
guish between state and self-regulatory
arrangements. While the latter are often impli-
citly sponsored by the initiatives of the former,
the former are forging alliances with the latter.
Attempts have been made to characterise this
shift in regulatory style in terms of “responsive
regulation” (Ayres & Braithwaite, 1992),
“governmentality” (Rose & Miller, 1992) “self-

organisation” (‘Teubner et al., 1994) “mutual
regulation” (Simmons & Wynne, 1994) and
“reflexive law” (Or&, 1995). The general idea
is that command philosophies of regulation are
giving way to forms of control which utilise the
cognitive and economic resources of the
regulatee. Regulation is increasingly pushed
down into organisations and their internal
systems of self-assessment and control. In other
words, internal control systems are being
explicitly recruited into regulatory programmes
with the hope of improving compliance.3

This shift reflects a “managerial turn” in
regulation and is clearly visible in the environ-
mental field (Hajer, 1994). The “shrinking
state” has created revenue opportunities for
management consultants as they take on the
role of mediating regulatory compliance and
economic strategy for their clients. Demand in
these new “green markets” (Grabosky, 1994)
has been constituted by a complex mixture of
responses to existing and anticipated legisla-
tion, public opinion, peer pressure and, no
doubt, the ability of management consultants to
generate corporate anxieties (Iasch, 1979, p.
385).* Not surprisingly perhaps, critics argue
that these changes only represent a “reman-
agerialisation of risk” (Beck, 1992) rather than
its reduction; form rather than substance (Ost,
1994). But enthusiasts regard a more con-
ciliatory style of regulation, which enlists third
parties and their internal control systems, as a
superior basis for ensuring compliance (Rous
seau, 1988; Aalders, 1993). This regulatory
optimism is reflected in the large number of
semiofficial acronyms expressing an integrated
logic of economic performance and environ-
mental care.5

The emergence of environmental audit
schemes typifies this shift in regulatory style.
Originally transactional environmental audits
(Gunningham & Prest, 1993, p. 495) emerged

3 For more on this regulatory shift see Power (1997, chapter 3).

4 The recent growth in environmentally related consulting in Europe has been conspicuous, now estimated at MO0 million
per annum. See S. Foxon, Twenty Year March to the Plateau, Financial Times 21 June 1995.

5 For example BATNEEC, which stands for Best Available Technology Not Entailing Excessive Cost.

126 M. POWER

in North America as part of private contracts for
the sale of land, business or for lending and
insurance arrangements. These early forms of
audit practice were shaped by an adversarial
regulatory context and the need for the “crea-
tion of authority through legal notions of due
process” (Smith & Wynne, 1989, p. 18).
Accordingly, lawyers have typically orche-
strated this work in North America and
accountants have either been unaware or unin-
terested in the field (Specht & Buhr, 1994). As
environmental regulation has developed more
generally, environmental audits to determine
compliance with those regulations have
evolved (Palmisano, 1989; Van Cleve, 1991).
Gradually, environmental auditing has emerged
from its diverse and dirty origins in the private
world of corporate transactions to connect
with, and exemplify, broader regulatory sensi-
tivities and agendas. Environmental auditing is
being reshaped and appealed to as part of a
regulatory strategy which seeks to internalise
regulatory compliance through an integrated
environmental management process (Bregman
&Jacobson, 1994, pp. 221-23).

Two environmental auditing schemes have
dominated recent European discussion and
debate: the Environmental Management and
Audit Scheme (CEC, 1993)” and BS7750 (BSI,
1993).’ The structures of these two schemes
have much in common although the former is a
European Union initiative for industrial sites
and the latter may apply to any organisation
and, given its international counterpart in the
International Standards Organization 14000 ser-
ies, has no jurisdictional restrictions. Both are
voluntary schemes for which organisations may
register in to obtain the perceived

benefits of official accreditation and publicity
for internal arrangements. However, only EMAS
provides for a (limited) form of public report-
ing, for which the opinion of an accredited
verifier is required.’

The structure of both schemes centres on the
operation of an environmental management
system which repackages and re-presents many
elements from existing strategic consulting
repertoires: an initial review; the formulation of
policy; the setting of environmental perfor-
mance standards (benchmarking); the develop-
ment of a system of internal control to monitor
actual performance against standards; a form of
statement on environmental performance
(EMAS); the external and independent verilica-
tion of the workings of the system and, for
EMAS, the statement of performance. These
latter elements are crucial since they connect
the internal workings of the organisation to the
public values of the regulatory environment.
Without the dimension of independent valida-
tion, these schemes would have some kind of
economic value for organisations, in the same
way that internal auditing does more generally,
but they would fail to connect the organisation
to more public regulatory structures.

The management system is central to the the
“managerial turn” in environmental regulation.
In theory, regulatory and corporate aspirations
coincide in the structure of such a system
which serves economic and environmental
goals simultaneously. Both auditing schemes
have been designed with the intention that
the benchmarking of standard practice will
develop, ranging from legal compliance to
“good” and then to “best” environmental
practice. Forms of internal and external

6 The scheme was originally designed to be mandatory. Following extensive lobbying by industry, registration for the
scheme was made voluntary. However, there remains the possibility that its status might change again, notwithstanding a
regulatory preference for delegated regulation.

’ The European Union regulation for environmental impact assessment fEL4) is not discussed here, although it must be
noted that many local government bodies, increasingly aware of their accountability to local publics, have developed
auditing practices on the back of EL&s (see Boden et al,, 1993).

s The environmental statement under EMAS must include inrer alz’u an assessment of aE significant and relevant environ-
mental issues and a summary of figures for material and energy consumption and waste generation, together with any other
significant effects. For a detailed analysis of these schemes, see HiRary (1993) and Woolston (1993).

ACCOUNTANTS AND ENVIRONMENTAL AUDIT 127

consulting have responded to the need to
assemble and reassemble the elements of the
environmental management system to achieve
this end. However, benchmarking processes
and environmental management and audit
schemes occupy separate institutional spaces:
the auditing schemes only require that there be
some standard or other and are silent on its
content.

Although the markets for these system based
environmental audits are still developing, there
has been pilot testing. In the context of EMAS
there have been worries that “sites with very
different actual levels of performance [will] be
given equal recognition under the scheme”
(Hemming, 1993, p. 5). These and similar criti-
cisms echo longer standing concerns about
quality assurance initiatives, such as BS5750
(Halliday, 1993), upon which BS7750 is based.
Despite an explicit statement by the BSI that
“BS7750 does not set out environmental per-
formance guidelines”9, the criticism is that
integrated environmental management ends up,
for all its good intentions, emphasising a formal
process relating the system elements rather
than the standards to which the system and the
organisation might be held to account. The
problem exemplifies one of the fundamental
trade-offs in the design of risk management
structures:

where uncertainty cannot be entirely eliminated, the
traditional physical-standards approach needs to be
supplemented or even replaced by an emphasis on
specify@ organizational processes that will ensure
careful balancing of arguments. Such an approach to
organlsational design is exemplified by the philosophy
supporting BS 5750. (Royal Society, 1992, p. 166).

The concern of critics is that the emphasis on
formal process has in fact displaced, rather than
supplemented, the traditional physical stan-
dards approach. In doing so the door has been
opened to the claims of accountants.

It remains to be seen whether environmental
audits are as tightly coupled to organisational
processes as they aspire to be; this is an impor-
tant researchable issue for the future. At a
conference on EMAS and BS7750 in 1995, a
spokesman for the NACCB, the UK accrediting
body for environmental auditors, expressed a
concern that “30% of the management system
was created for the audit” and that there was a
need to address substance rather than form in
the implementation of these schemes.” The
danger is that regulatory attention is deflected
from “deep” organisational process towards
chains of abstract procedure which substitute
for more direct forms of control (Simmons &
Wynne, 1992, p. 215).

EMAS and BS7750 have also generated con-
siderable debate over the nature and role of the
“accredited verifier” (EMAS) or “independent
certifier” (BS7750). Given the public stage on
which environmental audits are to operate, it is
maintained that the symbols of comfort
provided by the external auditor will only have
value where they are produced by a credible
and independent authority. It is often on this
question of independent validation that analo-
gies with financial audit have been claimed
(even though the independence of financial
auditors has been discussed and criticised for as
long as auditing has existed). For example, it
has been argued that ethical characteristics
similar to those offinancial auditors would be
needed in the environmental field (CICA, 1992)
and that the reliability of environmental dis-
closures in various media can be enhanced by
independent verification (ICAEW, 1992, p.
108). A few companies, such as the Caird
Group, British Airways and Norsk Hydro, have
provided experimental forms of independent
attestation in advance of EMAS and BS7750
schemes (See Gray, 1993, p. 252). The forms of
disclosure which accompany these indepen-
dent attestations are varied in scope and much

g See the BSI marketing pamphlet Introducing Registration to BS 7750 (London: BSI, undated).

i” M. Houldin, Accreditation Development, presentation at the Network for Environmental Management and Audit (NEMA)
conference, Progress on EMAS Verification and BS 7750 Certification, London, BSI, 31 May 1995. The NACCB has subse-
quently been absorbed into the UK Accreditation Service (UKAS).

128 M. POWER

depends on the nature of the report whose
detail is being verilied and on the nature of
the opinion provided by the verifier. The
Norsk Hydro report borrows the “true and fair
view’ ’ terminology from accounting but this
bears little relation to a financial auditing
report. l l

Concerns about independence have been
relatively late to surface in the environmental
auditing field for good reasons. Environmental
auditing is primarily conceived as a “manage-
ment tool” (ICC, 1991); it is an internal practice
which has grown outwards to connect with
regulatory programmes and which is experi-
menting with forms of external reporting. In
contrast the external financial audit, starting
from outside the organisation with the official
aim of serving outside stakeholders, has needed
to grow inwards and embrace internal systems
of control as they have developed. Compared to
financial auditing, concerns about independent
validation and reporting are relatively recent in
the environmental auditing field. One could put
the point as follows: whereas external financial
auditing has developed the ability to rely on
internal auditing, environmental auditing is an
internal practice which, in EMAS and BS7750,
relies on an external verification function. It is
important to keep these different normative

reference points in mind when discussing the
independence issue. l2

It has been suggested that accredited verifiers
will emerge as a new profession (Hillary, 1993,
p. v) and that the “battle over verifiers is about
to begin”.13 However, the profitability of
working as an independent auditor in _ the
environmental audit field is far from clear and
the EMAS market is still in its infancy. Indeed,
given industry pressure to avoid the duplication
of internal audit work and the existence of rules
for independence which seem stronger than
those for financial auditors, the market for
internal advice seems prima facie more attrac-
tive.‘* Because of the internal and private
history of environmental auditing, independent
validation is developing more as an “add on” or
extra service. But if this is so, why has the
external audit component of the environmental
audit schemes attracted so much attention,
particularly from accountants?

In part different groups’ claims to compe-
tence as external verifiers have the form of an
option: they do not know how the market will
in fact develop but they wish to be positioned
to service it. However, the issue also has much
to do with the legitimacy that being licensed as
an independent verifier will afford to practi-
tioners. Put simply, this means that qualification

I1 See also A. Jack, Green Accounting and Competitive Advantage, Financial Tfmes, 19 March 1992.

I2 In the Swedish context Almgren (1989, p. 67) suggests that new sensitivities about independence have emerged because
internal and external inspection functions have become blurred, largely as a result of subcontracting to consultants who are
also advising clients. The Institute of Environmental Auditors in the USA echoes financial auditing formulations by stating
that objectivity is a “state of mind” though it differs in admitting that, if this is so, then internal audit arrangements can be
independent in the required sense. Indeed, voluntary environmental audit practice tends not to invoke a rigid financial
auditing distinction between internal non-independent and external independent agents. For example, Plaut (1989, pp.
7-S), in the context of the Health, Safety and Environmental Surveillance program at Allied Signal Inc., claims that the
Corporate Audit department would have “a high degree of independence from health, safety and environmental program
management-but would not have the needed understanding of the subject matter” (pp. 7-8). Such a statement suggests
that, within the environmental auditing field, independence is just one value among others and can be satisfied by struc-
turing internal arrangements. This contrasts with the central role that independence plays for the external Enancial auditor.

r3 A. Jack, The Green Time Bomb, Ffnancid Times, 31 March 1993.

‘* One important stumbling block to the claims of accountants as verifiers of environmental statements under EMAS is the
imposition of independence requirements which are more stringent than those for financial audit. The NACCB (1995,
clause 4) generally disbars verifiers from acting as consultants, although this does not apply in the “developmental phase”
when a “transfer of expertise” is desirable. Such rules will restrict the opportunities for accountants, in the UK at least, to
work as verifiers unless organisational structures and “chinese wall” arrangements can be designed to satisfy regulatory
misgivings.

ACCOUNTANTS AND ENVIRONMENTAL AUDIT 129

as an accredited verifier, recognised by the
appropriate state delegated body under EMAS,
will provide added credibility for those engaged
in the market for expert mediation more gen-
erally. It is not that accountants or others will
always wish to work as verifiers but that the
entitlement to do so provides an edge in the
market for advice more generally. This means
that independence is a stake in the market for
professional advice and that the rhetoric of
independence “plays a productive role in orga-
nizing and legitimizing relations of power”
between different professional groups (Robson
et al., 1994, p. 532) and in securing and
expanding the accounting jurisdiction (Sikka &
Willmott, 1995, p. 550).

To obtain state recognition of a capability for
independent validation is to assume a certain
position in the market for expertise, a market in
which the creation and preservation of bier-
archicuZ structures of practice is more impor-
tant than the maintenance of boundaries
between different fields of knowledge. This
point, which is crucial to understanding the
claims of accountants in the environmental
field, will become clearer as the multi-
disciplinary nature of environmental auditing is
considered.

MULTIDISCIPLINARY IDEALS AND THE
INSTITUTIONAL INDETERMINACY OF

EXPERTISE

It has become widely accepted that environ-
mental auditing requires a multidisciplinary
approach. l5 For example, one must “seek to
build audit teams with an appropriate mix of
skills” (ICAEW, 1992, p. 112). Similarly, there is
a need for a “multidisciplinary team of scien-
tists, engineers, lawyers and accountants” (FEE,
1993, p. 12) for “lawyers. .engineers,

chemists, hydrologists, geologists, biologists
and other scientists” (Salter, 1992, p. 149) who
“possess a mixture of technical, management
and environmental legislative skills” (Hillary,
1993, p. 36). Exactly “which disciplines
the external auditors will be drawn
from. .remains up in the air” (Sanehi & Waire,
1991) but they will need “experience of
working in multidisciplinary teams” (Huizing
& Dekker, 1992, p. 444). Their knowledge base
“could include, but is not restricted to,
management information systems, engineering
control systems, management systems,
accounting, finance, statistics and the law”
(TEA, 1991).

Veldhuizen (1989, pp. 80-90) describes the
environmental auditing programme of Noranda
Inc. in which auditors are drawn from “che-
mists, engineers, environmental management
scientists, industrial hygienists, medical doctors
and nurses, and process, transportation and
emergency response experts.” At Norsk Hydro
(Syrrist, 1989) the audit team consisted of an
engineer, a systems auditor and a production
manager. And in the context of physical ground
investigations it has been stated that “many
organisations do not have in-house
expertise. . .A profusion of professions claim to
possess expertise in such matters, but the most
complete picture will often be obtained Erom a
multidisciplinary approach” (Dennis, 1993,
p. 23). Dewar argues that “the natural reaction
perhaps is to see such work as being the
province of environmental scientists, process
engineers or those with similar skills. The dis-
cipline of accountants and auditors may appear
less relevant” (Dewar, 1993, p. 10). But, like
many accounting based practitioners, he argues
for the skills of accountants in the field of sys-
tems work, financial implications and their
emphasis on the importance of “hard evi-
dence”, an irony given the traditional …