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Does green accounting add up?

5 Oct 09

Robert Outram looks at how the accountancy profession is learning to apply its skills to managing and reporting on environmental data

by Robert Outram

Are accountants part of the environmental problem or part of the solution? David Collison, professor of accounting and society at the University of Dundee, says: “Accountants provide information that drives important decisions, but very often this information is seriously flawed, because it does not take account of the environmental impact of those decisions.”

Many large companies produce an environmental report, but there is little consistency. As Collison puts it: “It is fundamentally difficult because you are looking at different companies in different industries.”

In corporate reporting in the UK, the “business review” is the normal home for environmental information. The Department for Environment, Food and Rural Affairs (DEFRA) has produced guidance on this, including 22 suggested environmental key performance indicators.

Paul Druckman, a past president of the Institute of Chartered Accountants in England & Wales, is chairman of environmental data business Trucost, which helps companies benchmark their performance and also provides information to third parties, such as “low-carbon funds” looking to assess potential investee businesses.

Druckman says: “Sustainability is a key issue. If we are not careful, an environmental reporting standard could just be more  historic reporting on different numbers. It must be connected, both to the strategy of the business and to financial reporting.

“We are quite a long way from where we should be, but within the next five years I believe we could get somewhere quite substantial.”

Druckman is also chairman of the Sustainability Policy Group of the Fédération des Experts Comptables Européens (FEE), the European accountants’ body, and he chairs the Prince of Wales’ Accounting for Sustainability Forum. The latter represents 16 leading accountancy bodies around the world, including ICAS.

Earlier this summer, the forum’s members signed up to five key principles: to influence and inform; to lead by example; to drive thought leadership; collaborate through the forum; and, to incorporate accounting for sustainability within training and professional education.

Other programmes around the world tackling sustainability include:

• The Global Reporting Initiative (GRI): part of the United Nations Environment Programme, the GRI is the world’s most widely used sustainability reporting framework.

• The International Federation of Accountants’ Sustainability Framework: a web-based tool for professional accountants addressing: business strategy; internal management; financial investors; and other stakeholders.

• The World Business Council for Sustainable Development: a CEO-led, global association of some 200 companies dealing exclusively with business and sustainable development.

Measuring carbon emissions is another key issue, but here, too, according to David Collison, there is little consistency. He says: “It’s a mess, frankly. The Climate Disclosure Standards Board – [supported by the Carbon Disclosure Project, an independent not-for-profit organisation] has proposed a format for reporting emissions. The Confederation of British Industry and DEFRA also have their own proposed formats, so even in the UK there are alternatives.”

Environment management accounting (EMA) applies accounting techniques to save money as well as reduce environmental impact. Collison says: “For example, you can use activity-based costing techniques to analyse costs and reduce waste.”

Envirowise, a government-supported body providing free advice to business on environmental issues, has produced a free guide to EMA, Reduce your costs with environmental management accounting, endorsed by ICAS among others.

So accountants can be part of the solution. As Collison puts it: “Any profession that claims to serve the public must raise its voice to help the policymakers on environmental issues. They need all the help they can get.”

Envirowise and ICAS will be co-hosting a free workshop on “green accounting” at the Radisson Blu Hotel, Glasgow, on Wednesday 28 October, 5.30pm-7.30pm. For details or to download the free guide to EMA, see the Envirowise website

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