Environmental reporting continues to increase

Companies are under increasing pressure to produce accurate environmental reporting. In the financial sector, despite the limited direct environmental impact of their activities, KPMG found that 15 percent of banks, insurance, and securities companies produce an annual environmental report. This, combined with shareholders’ growing interest in companies’ non-financial performance, encourages the financial institutions’ clients to produce environmental reports of higher quality.

Environmental reporting is now mandatory in several countries and European Union member states will soon be required to register emission data from large companies and report it to the European Commission.

KPMG assessed the state of environmental reporting among the Fortune top 250 multinational in the world and the top 100 companies in 11 countries. Similar surveys were held in 1993 and 1996. The results show that the number of companies with an environmental or health, safety and environment (HSE) report increased to 24 percent in 1999. This compares with 13 percent in 1993 and 19 percent in 1996.
Compared to 1996 the rate of publishing external environmental and HSE reports increased in all countries except the USA. In the countries included in the 1999 Survey, companies in Germany published the most reports (36 percent), followed by those in Sweden (34 percent). Four countries published fewer reports than the average: Belgium, Finland, Australia and France. However, with the exception of France, these countries are catching up fast, says KPMG.

Independent verification

Various pressure groups have reservations about environmental reporting as a way to communicate to the public, because such reporting tends to concentrate on internal procedures. Professor George Molenkamp, chairman of the KPMG International Environment Network, disputes this opinion: “Companies can’t afford to give an incorrect picture of their policies and operations, especially not towards their shareholders. Besides, an increasing number of companies have their environmental reports verified by independent third parties, often combining the expertise of environmental experts and financial auditors”.

Of the total number of environmental and HSE reports 19 percent had been verified by an independent party. The report includes an analysis of the verification statements based on guidelines, form and content.

Green catalyst

From the side of business, there is still a bias that investing in environmental measures is not beneficial from a business point of view. Despite good intentions, many in business treat these measures predominantly as a cost factor. They feel that environmental expenses do not add to the bottom line and may affect their competitive advantage, says the report.

Molenkamp believes that more and more evidence is accumulating to show a different picture. “It appears that those companies which invest in cleaner production processes, product innovation and supply chain management can improve their financial situation and market position as well. There are indications that this leads to a higher appreciation of these companies in the financial world and a proven increase in share prices.

“In a number of cases it also appears that environmental management is a “green” catalyst for improvement in overall business performance. In general: environmental responsibility makes a significant positive contribution to shareholder value.”