The previous sections reviewed some recent developments in external environmental reporting and adaptations to internal costing systems to better capture relevant costs for environmental decisions and refocus management's priorities. This section covers three major issues that remain problematic both in theory and in practice: whether the environmental costs to a business can be regarded as equivalent to costs to the environment; the nature of the respective roles of quantitative physical measures and financial measures; and the fundamental nature of accounting's methodology for identifying costs.
Most of the initiatives discussed above deal with environmental impacts on companies (such as the potential liabilities or asset impairments that may need to be reported in external financial statements) and the potential cost savings and other benefits that may need to be recognized if companies are to take appropriate action to reduce waste, prevent pollution, etc., By responding to these environmental impacts, companies may benefit both the environment and their own bottom line. This approach avoids conflicts between these often contradictory outcomes because the externalities that it imposes do not presently have to be internalized—through regulatory or fiscal mechanisms—as its own costs. Thus, reporting of expenditures on environmental cleanup may not signify an environmentally "friendly" company but an "unfriendly" company that is doing something to mitigate the environmental damage it is causing. Full accountability needs to extend beyond the company's own costs and revenues to capture effects on the environment, for example through emerging—but still controversial—approaches of environmental impact assessment and life cycle analysis. (See, for example, Milne, 1994.)
Clearly, given the state of the art, any such accounting is fraught with theoretical and practical difficulties (Cope and James, 1990), although pioneering attempts have been made, for example, in BSO/Origin's annual reports (Macve and Carey, 1992). Various bodies (such as the United Nations and International Institute for Sustainable Development) have called for further research and experimentation with natural resource accounts that measure the impairment of natural and environmental resources and provide, for example, a "sustainable development profit and loss statement based on sustainable development accounting principles" or an environmentally adjusted "value added statement" (Macve and Carey, 1992, p. 75). Moreover, uncertainties and measurement difficulties have not inhibited accountants from reporting intangibles that companies do benefit from, such as research and development, brands, and goodwill, when user demands or management requirements and incentives have been sufficiently strong (Arnold et al., 1992). If stakeholders are to receive a full account of a company's