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Eco-friendly corporates will reap rich benefits, say experts

All commercial establishments should report their contribution to the preservation of environment as part of their social obligation and this should be reflected in their annual financial reports, according to a group of experts.

A workshop was jointly organised by the United Nations Conference on Trade and Development or UNCTAD, the Institute of Chartered Accountants of India and the World Bank in New Delhi. Speakers opined that the environmental performance indicators developed by UNCTAD would go a long way in proper environmental accounting and reporting, which was the need of the hour.

Dilip K Biswas, chairman, the Central Pollution Control Board, said assessing the environmental performance of a company per se required a well-conceived approach to develop methodology. It is easy to find the loss and profit in case of financial accounting with the help of already established procedures, but the same cannot be said of environmental costs, he observed.

The performance of a commercial establishment should be judged not only by its financial soundness and other indicators but by its simultaneous contribution to the social responsibilities which includes environmental preservation.

Andre Coulson of UNCTAD dealt with accounting and financial reporting of environmental costs and liabilities. He focussed on the duty of managements to report the financial implications of their activities in relation to the environment and natural resources.

Another expert, Roger Adams, said environmental issues were increasingly relevant to the financial performance of major corporations and the portfolio decisions of investors. As environmental concerns move from being a cost of doing business to being a potent market force in their own right, the risks and rewards associated with a corporation's environmental performance will grow, he said.

One of the issues highlighted was the benefit accruing to enterprises that engage in environmental reporting, which included improved relations with key shareholder groups and environmental regulators, enhanced workforce morale, identification of cost savings and improvements.

Another UN expert, Constantine Bartel reiterated that in order to give enterprises a level-playing-field, environmental policy instruments such as taxes should reflect the cost of externalities.

The experts said the environmental performance indicators developed by UNCTAD, now being standardised, would help investors to compare environmental performance of companies. The environmental reports could be meaningful for the enterprise and in particular for communication of environmental performance to the financial community.

The secretary-general of UNCTAD and the president of the ICAI said accountants were central to the execution of environmental policies both at the micro- and macro-level.

UNI

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