Accountancy & Management: Reports start to clean up their act: Environmental reporting in company accounts is catching on, but it still has a long way to go. Roger Trapp reports

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ACCOUNTANTS might not have much in common with Al Capone. But they have been prime contenders in the search for public enemy number one as far as the green lobby is concerned, according to John Elkington of the environmental consultancy SustainAbility.

The problem is their role as 'guardians of the bottom line' at a time when business groups are starting to be persuaded that they have some responsibility for the environment, he told last week's Environmental Reporting Awards ceremony at the Royal Geographical Society in London.

But he saw a profound shift in attitudes that had already led to the idea of environmental reporting moving across the Atlantic from the United States; growing numbers of companies were at least mentioning the subject in their annual reports. The awards, organised by the Chartered Association of Certified Accountants (ACCA), are designed to encourage this move.

Much progress has been made in a short time. But, as Professor Rob Gray, director of Dundee University's Centre for Social and Environmental Accounting Research, and Professor David Owen of Huddersfield University, write in an ACCA paper on the second year of the award scheme, there is still some way to go.

Professors Gray and Owen, both judges in this year's competition, are at pains to point out that they do not want to detract from the 'remarkable achievements' of the companies that entered. Nevertheless, they note that the BT report - which won - is not without its problems.

'The lack of comparative data, the lack of financial data, the failure to integrate the environmental report with the main accounts and, particularly, the absence of independent attestation all ensure that BT falls short of some Utopian ideal. At the present state of play, this 'falling short' seems inevitable and experimentation desirable.'

So, what about the rest? The fact that British Airways, joint winner last year with Norsk Hydro, was, along with the Body Shop, given a special commendation suggests that the judges are not drawing from a very large pool. Although the level of entries this time was twice that in the first year, many still took a broad-brush or patchy approach.

However, Professors Gray and Owen identify three special areas of development in the past 12 months - in reporting against published objectives, in developing new local mechanisms for communication and transparency, and in the first shoots of financial reporting on environmental matters. ACCA predicts that BS7750 and the European Community eco-audit/eco-labelling scheme will contribute to greater concern for and reporting of companies' effects on the environment.

At the same time, such bodies as the Institute of Directors, the Confederation of British Industry and the 100 Group of Finance Directors are contributing to the debate. In addition, a CBI representative sat alongside one from the Trades Union Congress as well as environmental specialists, such as Mr Elkington, on the panel of judges - and will do so again this year.

But perhaps the biggest boost will come from a company such as BT emerging as the winner. As Mike Bett, the deputy chairman and board member responsible for environmental issues, said in his acceptance speech last week: 'In the increasingly competitive world of international telecommunications I think it would be true to say that environmental issues are unlikely to be a major factor determining BT's future prosperity. But the environment concerns us all, and a healthy and prosperous community is a fundamental necessity for the successful future of all UK industry and commerce.'

Moreover, he and his fellow board members knew they were increasingly likely to be asked about the issue, and needed to be able to demonstrate a positive response.

ACCA says the aim of the award scheme is 'to identify and reward innovative attempts to communicate environmental performance'. But the paper by Professors Gray and Owen appears to suggest that encouragement of those not obviously making an environmental impact - or concerned about it - is also a fundamental factor in choosing the winners.

Hence, the Body Shop is praised for 'perhaps the most striking report received this year'. But, while the judges felt there was much to be learnt from the company's 'direct approach to transparency', they also pointed out that 'only the Body Shop could have produced - or is likely to produce - a report of quite this nature'.

On the other hand, BT on its first foray into the field had come up with something that 'represented the sort of achievable and useful document that could be commended as a guideline to every organisation in the initial stages of environmental reporting and disclosure'.

And perhaps disclosure is the key. While others are hailing the eventual arrival of the 'green accountant', Jonathon Porritt, the prominent environmentalist who presented the prizes last week, stressed the value of encouraging companies to go 'a little bit further down the road of information disclosure'.

In the past, environmentalists had had to content themselves with measuring 'gusts', or blasts of environmental rhetoric from companies and government bodies, and 'SDRs', or sustainable development references. It was much better to have hard facts.

It is easy to laugh - as he did - at such figures as BA's energy consumption at one of its sites or the percentage of employees arriving at the Body Shop's headquarters by car. But facts like these are accompanied by descriptions of such shortfalls as prosecutions for excessive noise and the like. And there is no doubt that they represent a new willingness on the part of organisations to tell their 'stakeholders' - as BT, for one, calls interested parties in the modern corporate governance parlance - an increasing amount about the business.

Even the chemical companies are making great strides in telling employees and communities about what they are up to - an unthinkable idea not so long ago. Indeed, Dow Chemical - which along with others in its sector was, according to Mr Elkington, seen as the Great Satan a quarter of a century ago - now has a 'Pink House', to which anybody can go to inquire about the environmental performance at the local plant.

As such, the development of environmental reporting neatly dovetails with the work of the Accounting Standards Board under David Tweedie, which has as its central tenet proper and full disclosure of all material matters in company accounts.

(Photograph omitted)