The constraining effect of incomplete contracts on the public reporting of waste management data

Abstract

This article assesses the extent to which incomplete contracts and agreements in waste management limit accountability to stakeholders. The theory of incomplete contracts holds that contracts are under-specified in areas where transaction costs in controlling contingencies exceed the perceived benefits to be derived from such control. A textual analysis of the narrative embodied in public policy documents, the corporate plans of an Australian regional waste management authority and its member councils, and transcripts from interviews with key actors, indicate complex contractual relations resulting from commonwealth and state waste policies. The study finds transaction costs are the immediate cause of incomplete contracts in the provision of waste data. The resulting agency problem could be alleviated by designing a more complete social contract, through legislation and regulations specifying minimum data requirements in contracts to outsource waste management. Improved regulation would facilitate more effective policing of illegal stockpiling of wastes and reveal the impact of the recently increased waste disposal to landfill on proximate amenities such as property values.

Accounting for waste management: a study of the reporting practices of the top listed Indian companies

“…(2002) found with Spanish firms, Oosthuizen et al . (2109) discovered with an Australian regional waste management authority and its member councils, and Deegan and Gordon (1996) advocate more generally.…”

“…The increase in reporting is consistent with Killian and O’Regan’s (2016, p. 2) legitimacy theory‐based argument that ‘[s]ocial accounting builds local legitimacy gradually, gathering and serially reiterating accounts that tie the company to the community’. In fact, the escalating effect Killian and O’Regan (2016) write about can be linked to Oosthuizen et al .’s (2109) idea of the evolution towards more complete social contracts.…”

“…Drawing on the economic theory of incomplete contracts, which has its roots in Williamson’s (1981) transaction cost theory, Oosthuizen et al . (2019) suggest that companies may be deterred from maintaining data about their waste production and disposal due to the transaction costs involved. In other words, companies that believe the costs of constructing more complete social contracts outweigh the benefits will eschew collecting and reporting data about their waste management.…”

“…A possible explanation for the general under-reporting of companies' waste practices, or at least for those companies that outsource or rely on other supply chain partners to manage significant portions of their direct or indirect solid and liquid wastes, is offered by Oosthuizen et al (2019). Drawing on the economic theory of incomplete contracts, which has its roots in Williamson's (1981) transaction cost theory, Oosthuizen et al (2019) suggest that companies may be deterred from maintaining data about their waste production and disposal due to the transaction costs involved.…”

“…A possible explanation for the general under-reporting of companies' waste practices, or at least for those companies that outsource or rely on other supply chain partners to manage significant portions of their direct or indirect solid and liquid wastes, is offered by Oosthuizen et al (2019). Drawing on the economic theory of incomplete contracts, which has its roots in Williamson's (1981) transaction cost theory, Oosthuizen et al (2019) suggest that companies may be deterred from maintaining data about their waste production and disposal due to the transaction costs involved. In other words, companies that believe the costs of constructing more complete social contracts outweigh the benefits will eschew collecting and reporting data about their waste management.…”