As noted in Overview of industry 4.0 section considerable uncertainty exists over whether or how quickly the world might move into the fourth industrial revolution. Nonetheless given the mounting interest and the large capital investments involved the question arises as to what academics, practitioners and policy makers might do now to try and secure the potential benefits from Industry 4.0 for development of environmental accounting.
Implications for academics
Academics could help in two main ways. First they could adopt a research agenda to address environmental accounting issues which might be able to be solved in an Industry 4.0 setting and, second, they could explore ways in which environmental accounting education could be improved. The research agenda could consider how external environmental accounting and environmental management accounting could piggy-back on the potential of Industry 4.0 for providing new, more accurate, better quality, real time physical and monetary data about businesses.
It would be of use for academic research to establish the sectors in which Industry 4.0 is likely to have the greatest impact and where environmentally sensitive issues arise as it is in these sectors where improvements in environmental reporting and decision making are likely to be the most effective. To date Industry 4.0 has tended to focus on potential gains for capital intensive industries, such as aviation, oil and gas, transportation, power generation and distribution, manufacturing, healthcare and mining (Deloitte, 2015; General Electric Company and Accenture 2014; Staufen 2016). The environmental accounting literature has looked at industries affecting and affected by environmental issues such as water security and greenhouse gas emissions (Cormier and Magnan, 2015; Deegan and Gordon, 1996). Identifying and exploring overlaps between expected Industry 4.0 impact sectors and environmentally sensitive sectors could be the subject of academic research to help gain the highest leverage for advancement of environmental accounting to improve corporate environmental performance.
A potentially important second strand of academic research would be to examine the size of companies most likely affected by Industry 4.0 as those companies could experience the benefits of faster connectivity and higher quality data and would be suitable targets for increasing the rate of environmental accounting take up. At present the size of companies targeted by Industry 4.0 is not clear. To date much of the potential for Industry 4.0 seems to have been aimed at large, multinational companies (Davies, 2015; Deloitte, 2015). However, it is also argued that small and medium sized enterprises are not but should be involved (General Electric Company and Accenture 2015; Olle and Claus, 2015; Sommer, 2015). Deloitte (2015, p.10) states “Very large manufacturing companies and multinational groups already consider the topic very important. Small and medium-sized companies do not yet appear to consider Industry 4.0 to be of great relevance to them even though these companies are most likely to be the big winners from the shift.” Small and medium sized enterprises form a central part of most economies and have the opportunity to build smart manufacturing from scratch and implement digital transformation rapidly, rather than rebuilding or retrofitting to integrate data gathering across different units as large businesses need to do (Deloitte, 2015). Constraints on the involvement of smaller companies in current Industry 4.0 initiatives are perceived to include lack of awareness of economic benefits, insufficient resources for establishing intelligently networked processes, and staff not having sufficient knowledge (Olle and Claus, 2015). Unless these challenges are overcome Industry 4.0 investments and developments in larger companies are likely to be the stronger catalyst for development of environmental accounting. If Industry 4.0 is taken up by smaller companies studies could be undertaken to draw attention to the conditions when eco-efficiency measurement and reporting are most likely to succeed, as environmental accounting tools are designed to support decision making by companies of all sizes (Burritt et al., 2002; Herzig et al., 2012).
A third potentially helpful avenue of research could look internally at the impact of Industry 4.0 on roles of and communications between managers with different environmental responsibilities. In discussions of Industry 4.0 much emphasis is placed on physical and cyber aspects of production processes, information flows and the role of production and information technology managers to improve productivity and reduce risk (Van Thienen et al., 2016). Environmental accounting requires monetary measures of performance as well, and although not emphasised at present in the Industry 4.0 literature, research could examine whether and how the connection with physical and eco-efficiency measures could be added at little extra cost.
A fourth research topic could be exploring whether, how and to what extent there is a spin-off in Industry 4.0 for environmental accounting from managers working together collaboratively. Industry 4.0 relies on cross-disciplinary engineering occurring seamlessly through design, development, manufacture and disposal of products and data at each stage of the product life cycle being accessible by all from a single source on the cloud and boosts the need for transdisciplinary thinking which also includes practitioner involvement (Deloitte, 2015). Environmental accounting is transdisciplinary by definition and needs teams of professional with different expertise working together. On water scarcity issues for example, team members include environmental managers who tend to be engineers, accountants, lawyers and meteorologists, working together to identify, measure, optimise and perhaps report environmental and economic performance (Tingey-Holyoak et al., 2014). Comparison of pre- and post- Industry 4.0 structures and processes could identify benefits and potential challenges for environmental accounting take up in the two settings, given the relative availability of accurate real time digital physical engineering, environmental and monetary data.
A fifth research topic area to help ensure benefits of Industry 4.0 are captured for promoting environmental accounting is supply and value chain management. Industry 4.0 emphasises the integration of parties in a supply chain in order to improve processes, data flows, scheduling and trade, economic benefits but does not consider environmental issues per se. Once the mechanisms for integration are in place supply chain collaborators could be able to gain access to real time common pool data to help optimise environmental and economic performance. But little research has been conducted into these possibilities. There is, however, no shortage of funding to support installation of the basic Industry 4.0 infrastructure to provide dynamic, real time data at all stages of the value chain (Deloitte, 2015). In Britain in 2012 alone the government provided £170 (A$300) million in funds to established or new small and medium sized enterprise suppliers through an Advanced Manufacturing Supply Chain Initiative to high value economic, social and environmental outcomes and demonstrated carbon efficiencies (Davies, 2015). Where considered useful it is but a small step to introduce environmental accounting to help confirm such outcomes and efficiencies, and to report them in real time to external parties.
In summary, a new academic research program could be aimed at establishing how Industry 4.0 might facilitate more accurate, high quality, real time environmental management accounting and external environmental reporting in relevant sectors, company sizes, across different management roles and collaborative settings, as well as in intra-organisational settings such as supply chains.
Once such a research agenda is underway the results could be incorporated into the curricula of undergraduate and postgraduate students as a foundation for providing knowledge of both Industry 4.0 and environmental accounting as a basis for responsible business.
Implications for practitioners and policy makers (professional associations and government)
Accountants in practice and in business can help capture the benefits of Industry 4.0 for environmental accounting in a number of ways.
One critical issue is whether practitioners, acting as providers of professional services, are prepared to take on a bigger role than conventional accounting embraces. The emergence of Industry 4.0 and environmental sustainability are two settings within which accounting can broaden its scope, especially through the area of environmental accounting. Raising awareness of the potential changing scope of accounting work is being discussed by professional accounting bodies as part of their thought leadership (Guthrie et al., 2015). Signatures of Industry 4.0 are noted in the context of exponential increases in computer processing power, connected work that can be completed almost anywhere in the world, and automation replacing mundane, repetitive tasks of accounting, audit and taxation (Dawson, 2015) as well as the need to keep on top of environmental sustainability as a hot topic (Cooper, 2015). Professional services firms can be influenced by both or neither. Industry 4.0 is nevertheless addressed by the Big 4 accounting firms, Deloitte (2015), EY (2016), KPMG (2015); PwC (2016), with a focus on increased efficiency and lower cost but none of them mention the environment in the same context. Professional associations also scan for potential future changes to keep their members advised. One element of the professional associations’ advice stems through professional development education, and the leading firms gaining knowledge. At this stage little data is available about the promotion of Industry 4.0 by professional accounting associations– another gap for academic research to fill – hence the connections they are making with environmental accounting also are unexplored. Bringing together tools from these two areas will be a challenge, but one which could reap large rewards, for business and the environment.
To capitalise on aspects of Industry 4.0 environmental accountants will need to be educated at university and trained through ongoing professional development to understand the new digitised data network systems and to appreciate the benefits of digitalisation for obtaining quality and timely data about corporate eco-efficiency and other related concepts. Government regulation might have a part to play in gleaning from Industry 4.0 the best path forward for environmental accounting education and practice. Government is unlikely to have any impact on environmental management accounting which is largely devoid of any external influences and depends on data relevant to management for decision making. If influence is to be brought on companies to adopt environmental accounting in an Industry 4.0 setting it is more likely to spring from funding by government for developing the standards behind language systems in place for recording and transferring data. Perhaps this could be achieved in the digital unified reporting manner outlined by Seele (2016) incorporating physical and monetary data. For example, for financial reporting since 2009 the U.S. Securities and Exchange Commission has required digital XBRL common data repository financial statements from companies. Within Industry 4.0 it could be a small step, at a relatively small expense, to build environmental virtuosity into the data gathering standards which already have a strong emphasis on economic efficiency. Furthermore, the profession could argue that requests made for government funding of Industry 4.0 developments for small and medium-sized enterprises should include the foundations for environmental accounting, working incrementally with carbon emissions reduction, water scarcity, land use changes, etc.