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Environmental Reporting

Chapter · January 2005

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Gray R. H. (2005) “Environmental Reporting” Kaikeigaku Jiten (Dictionary of Accounting) Y.Jinnai (eds)
(Tokyo: Aoki Shoten) (in Japanese) ISBN 4-250-20508-8

ENVIRONMENTAL REPORTING

Definition and Introduction

“Environmental reporting” refers to the preparation, presentation and communication
of information relating to an organisation’s interactions with the natural environment.
Such reporting can relate to all organisations but is most usually associated with
(typically large) companies. Equally, environmental reporting is most commonly
associated with self-reporting by organisations although reporting about other
organisations by government agencies and other independent bodies and pressure
groups remains an important pressure for environmental accountability.

Reporting about environmental interactions may occur within the financial statements.
Typically, such reporting would be related to liabilities, commitments and
contingencies for such matters as the remediation of contaminated land or other
financial concerns arising from pollution. (The USA’s `Superfund’ legislation and
reporting is perhaps the best known and developed reporting in this area). However,
such financial reporting is really not about environmental issues as such but about
financial issues which, in this case, arise from environmental legislation.

Environmental reporting is much more typically associated with the reporting of

quantitative and detailed environmental data within the non-financial sections of the
annual report or in stand-alone (including website-based) Environmental Reports.
Such reports might include pollution emissions to land, air or water, resources used,
or wildlife habitat damaged or re-established.

History and Regulation

Although environmental reporting has occurred for some time, modern environmental
reporting tends to be dated from 1990 when the first substantive stand-alone
environmental reports from companies such as Norsk Hydro (Norway and the UK),
British Airways (UK), BSO/Origin (Netherlands) and Noranda (Canada) set the pace
in a new wave of voluntary environmental reporting.

The vast majority of current environmental reporting is voluntary. It has grown slowly
but steadily and become much more widespread throughout the last 10 years or so. It
remains, however, dominated by the big, corporations. These businesses have
expended great effort to persuade the public and governments that environmental
reporting can remain a voluntary activity but, unfortunately, as long as it remains
voluntary the majority of the world’s companies will continue to ignore it.

The United Nations has been at the forefront of attempts to make environmental
reporting compulsory. Countries as diverse as Denmark, Netherlands, Australia and
Korea have all introduced some form of compulsory reporting and despite business
efforts (most obviously in New Zealand and the UK), the trend is now one of slow but
inexorable progress towards much-needed compulsory environmental reporting.

Format and Quality

The quality of voluntary environmental reporting is very diverse despite stimuli for
increased quality from ethical investment funds, environmental campaigners and a
range of Environmental Reporting Award Schemes (first developed by the ACCA in
Britain). It is common practice for an environmental report to include information on
 Gray R. H. (2005) “Environmental Reporting” Kaikeigaku Jiten (Dictionary of Accounting) Y.Jinnai (eds)
(Tokyo: Aoki Shoten) (in Japanese) ISBN 4-250-20508-8

the company’s policies and procedures, its environmental management systems and
data relating to its pollution and trends in emissions. Indeed, most reports tend to
emphasise eco-efficiency – which refers to the reduction of resource and energy use
and waste production per unit of product or service. Very few reports, however, deal
with the organisation’s complete environmental interactions. For this, reports must
include eco-balances – which identify all inputs, outputs and wastes of the
organisation – plus an ecological footprint – which estimates the total environmental
impact of the organisation. Whilst companies can demonstrate great success in eco-
efficiency, most companies’ ecological footprint continues to rise. Companies,
naturally, do not want to make such data public.

Sustainability and the Future

Our present systems of economic and business organisation are simply not
sustainable. Environmental (and, increasingly, social responsibility) reporting is
beginning to address the extent to which a company is (or is not) contributing to
sustainable development. Most companies are currently profoundly un-sustainable
and do not, of course, wish to formally disclose this in an annual environmental
report. The Global Reporting Initiative is a voluntary process which is slowly
developing increasingly tough guidelines that, eventually, will encourage companies
to report on their (lack of) contribution to sustainability.

Environmental reporting is here to stay and, eventually will become a legal

requirement. Whether serious and substantive sustainable development reporting
(something which is still fairly trivial and under-developed) can be adopted quickly
enough to help prevent the further spread of irreversible global environmental and
social desecration seems, unfortunately, very unlikely.

Further Information
Association of Chartered Certified Accountants (ACCA) website at
www.accaglobal.com/publications/as_index

Centre for Social and Environmental Accounting Research (CSEAR) website at

www.gla.ac.uk/departments/accounting/csear

Gray R.H. and K.J.Bebbington (2001) Accounting for the Environment 2nd Edition (London: Sage)

Schaltegger S. and R.Burritt (2000) Contemporary Environmental Accounting: Issues, concepts and
practices (Sheffield: Greenleaf)

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