inhibit the adoption of more extensive environment reporting by more companies. The major inhibitor, however, is the inadequacies of internal environmental-management systems. Few companies have systems "that allow them to produce this kind of data and therefore many have a significant hurdle to jump before they can produce an environmental report for public consumption" (KPMG, 1993, p. iii).

Changes needed in internal systems are both organizational and technical in nature. Top-down mission statements are inadequate without a wholesale change in management culture from top to bottom and in the education, training, and incentives provided to middle managers and other employees.

To effect these changes, several steps may be taken (Macve and Carey, 1992). Management should establish clear lines of responsibility on environmental matters and give a board member overall responsibility for such issues. The company should set out its environmental policy, prioritize objectives, and develop information systems for monitoring performance. This is needed for external regulation and reporting as well as for internal decision making and control. The structure and systems adopted should be integrated within the company's mainstream management structure and systems. This is necessary to provide clear signals and incentives for action at all levels throughout the organization. There should be an internal environmental auditing program to ensure that environmental policies are being implemented properly. Companies that may suffer environmental incidents, such as oil spills, should establish procedures for managing such events.

The evidence that companies are achieving necessary internal changes is less than that for external reporting. It is not yet clear whether this is because the changes have not yet taken place or because researchers have not yet investigated them adequately.³

Conventional accounting systems may inhibit environmentally oriented actions and expenditures because the costs that are reported—and included in investment appraisal budgets—focus on the immediate direct costs of actions, processes, and products and ignore the levels of costs at which savings are most likely to occur (i.e., indirect and longer-term costs). Accounting systems also may fail to evaluate the potential benefits of environmental decisions. Thus, an exercise by the U.S. Environmental Protection Agency (EPA) and Du Pont, and a similar exercise in the United Kingdom on individual sites in the Aire and Calder Valley, showed that there are "many pollution prevention projects with paybacks of less than a year which are not being implemented," either because of competition for management attention or the difficulties of identifying the relevant causal