Purpose The purpose of this paper is to examine how stakeholders are engaged in the sustainability accounting and reporting processes of Australian local councils. Design/methodology/approach Managerial stakeholder theory through the use of the notion of stakeholder salience provides a theoretical basis for exploring stakeholder engagement in the sustainability accounting and reporting process. Case study research was used to explore the stakeholder engagement practices of three Australian local councils. Data collection methods included interviews and document analysis. Findings The findings of this research identified the importance of stakeholder engagement in the entire sustainability accounting and reporting process, the development of strategic plans and sustainability indicators, the measurement of sustainability performance and the preparation of sustainability reports. Research limitations/implications This study, by integrating the sustainability accounting and reporting literature with the stakeholder salience concepts of power, legitimacy, urgency and proximity, illustrates the critical role of stakeholder engagement in the sustainability accounting and reporting process of three local councils. Practical implications This study has implications for public sector organisations (PSOs) and their stakeholders in relation to stakeholder engagement in sustainability accounting and reporting. The findings of this study will also be useful to corporations in understanding the importance of stakeholder engagement in sustainability accounting and reporting. Social implications The public sector is expected to be a leader in sustainability and this paper provides evidence of three councils who through their stakeholder engagement provide exemplars of useful practices that could be adopted by other entities. Originality/value Prior research in PSOs has primarily focused on the sustainability accounting and reporting process but has given limited consideration to the involvement of stakeholders. The focus on stakeholder engagement through the use of managerial stakeholder theory extends the role of stakeholders from merely being an audience for sustainability reports to an influential contributor in the sustainability accounting and reporting process.

An overview and suggestions for future research Research overview and background The public sector is regarded as a steward for social and environmental issues. The primary objective of public sector organisations (PSOs) is to deliver public policy and promote social welfare (Ball and Grubnic, 2007). Their roles and responsibilities are more explicitly linked to the sustainability agenda than those of the corporate sector (Ball, 2002). The public sector has far greater responsibilities for promoting and supporting sustainable development in comparison to the private sector whose core goal is limited to maximizing shareholder value (Ball et al., 2014). The public sector is a significant employer and provider of services and consumer of resources; therefore, it has a significant impact on national and international progress towards sustainable development. Moreover, PSOs are facing increasing pressures to lead by example in managing and reporting sustainability issues (GRI, 2004, 2005; GRI FPA, 2012). Because of the critical impact PSOs have on the environment and society, it has become increasingly vital to explore their sustainability accounting, accountability and reporting practices as well as undertake research that engages with practitioners and policymakers in the public sector (Ball and Grubnic, 2007; Ball et al., 2014). Sustainability performance encompasses activities other than those financial measures used in the financial accounts such as natural resource conservation and emission levels, environmental activities and initiatives, aspects of employment, occupational health and safety, community relations, stakeholder involvement and the economic impact of the organisation (Hoque and Adams, 2008). Sustainability accounting enables the systematic identification and interlinking of the social, environmental and economic costs and benefits of organisational strategies and actions and embeds these considerations into organisational decision-making (Hopwood et al., 2005). Subsequently, sustainability reporting serves as "a vehicle to assess the economic, environmental and social impacts of the organisation's operations, products, and services, and its overall contribution to sustainable development" (GRI, 2004, p. 20). Existing literature indicates that the public sector has embraced sustainability accounting and reporting practices. The key research foci to date have addressed sustainability reporting practices (

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Purpose – This study aims to examine the state and extent of disclosures on stakeholder engagement in sustainability reporting in Australian local councils. Design/methodology/approach – Content analysis was used to analyse 23 sustainability/state of environment/annual reports out of a total of 563 local councils (city, shire, district, borough and regional) in Australia for the year 2009-2010 – those found to be using stakeholder engagement in the development of sustainability reports. A stakeholder engagement index was developed on the basis of the literature review to examine the extent of disclosures on stakeholder engagement. Findings – This study identifies: the Australian local councils that are engaging with their stakeholders in the development of sustainability reports; key stakeholders for sustainability reports; extent of engagement; media and approaches used for engagement; and difficulties in the engagement process. The results suggest that stakeholder engagement is an essential component in the development of sustainability reporting as it informs reporters of material concerns, issues and aspirations of key stakeholders. Research limitations/implications – The focus of this paper is the state of disclosures on stakeholder engagement in sustainability reporting. The findings of the paper are limited to only one level of governance of the public sector, that is, local councils. Originality/value – International standards such as Global Reporting Initiative and AccountAbility (AA) 1000 have signified the role of stakeholder engagement in the development of sustainability reports. However, there has been a little research that demonstrates whether or not organisations engage with their stakeholders for reporting purposes. This paper provides evidence of stakeholder engagement in sustainability reporting in Australian local councils.

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