Why wait for the law?

An argument often made for the avoidance of including environmental considerations into financial plans, budgets and the like is the fact that the duty of the financial officer is not to carry the social conscience of the organisation; his/her duty is to file an accurate and trustworthy set of accounts; "accountants have a whole host of professional obligations, but nowhere in the code of conduct for any accountancy body is the obligation to put the environment first"environmentalism is a personal moral choice (unless it becomes law)".

That last one is an interesting point. Firstly, the secretary of state is in consultation on the implementation of carbon accounting (http://www.defra.gov.uk/corporate/consult/carbon-accounting/index.htm). Whereas traditionally the focus of ‘green' policy has been on the manufacturing industry (an easy target and source of numerous easily reportable wins for the incumbent government), this quiet little consultation opens a Pandora's box of possibilities for central government, if the consultation leads to legislation, to demand reporting, reduction, reporting of the reduction, the appointment of NGOs to (charge for) audit and report, etc. (since the DoT will be busy enforcing the CSR elements of the Companies 2006) and fines.

Ah yes, the Companies Act 2006; originally due to come into force in October 2008 and now scheduled to kick in fully later this year. There are a couple of little clauses (S.172 and S.417, SS.(5)) that, should central government choose to enforce, may present a nice little money-earner to compensate for bail-outs and VAT level reductions; the introduction of the new 'enlightened shareholder value' duty (S.172) has been controversial. From 1st October 2007 it broadly replaced the old duty to act in the company's best interests, but now requires directors to have regard to the longer term and to various ‘corporate social responsibility' factors including the interests of employees, suppliers, consumers and the environment. Couple this with S.<em >417 (SS.(5) In the case of a quoted company the business review must, to the extent necessary for an understanding of the development, performance or position of the company's business, include

b) information about—

i) environmental matters (including the impact of the company's business on the environment) and

iii) social and community issues, including information about any policies of the company in relation to those matters and the effectiveness of those policies [..])

Now add all this to the current consultation and, bearing in mind this legislation applies to ALL limited companies except the very small and we may just have uncovered the revenue generator. The DoT officially has the power to suspend the trading licence of any company found to be in contravention of the Act (and to audit without prior warning); the reality will very likely be fines, levied with a large dose of moral and righteous fervour!

Now, you can wait for PC Green to come-a-knocking or… you can take action now. Benchmark and reduce; It will save you money today and fines tomorrow… or you can continue to say "accountants have a whole host of professional obligations, but nowhere in the code of conduct for any accountancy body is the obligation to put the environment first."

Peter Wognum

Topics: edie
Tags: | consultation | Corporate Social Responsibility | green policy | manufacturing
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