International efforts needed for success of corporate green reporting

A recent report warns of the dangers of a ‘patchwork’ of unrelated national regulations for corporate environmental reporting which could be very costly and inefficient for multinational companies.

To avoid this, researchers from Sweden’s International Institute for Industrial Environmental Economics (Iiiee) are calling for national governments and businesses to support international efforts on global standards for environmental reporting, such as the Global Reporting Initiative (GRI).

The key to corporate environment reports (CERs) is the public provision of information about the environmental impacts that each company is having in its day-to-day business. The GRI points out that, “Timely, credible, and consistent information on an organisation’s economic, environmental, and social performance is a key element in building sustainable societies.”

The Iiiee study was carried out to provide guidance on the feasibility of a planned mandatory scheme for CERs in Japan. Existing schemes for mandatory environmental reporting in Denmark, The Netherlands, Norway and Sweden were analysed from various perspectives including legal framework, administration and enforcement, scope and rules on content.

Variation in the legal approach taken by the four schemes reflects different objectives in terms of the content and target companies with resulting impacts on the administration and enforcement of the schemes. In The Netherlands and Denmark the schemes were introduced under environmental law, while the Swedish and Norwegian schemes come under company legislation.

Nearly all the schemes reviewed involve target companies that are subject to environmental planning or fall under activities covered by national environmental laws. An exception to this is the Norwegian Scheme, which requires that all companies report environmental issues in their annual accounts.

The report discovered significant variation in the numbers of companies included in the different schemes. The Dutch scheme requires mandatory environmental reporting from only 250 large companies in particular sectors that are seen to cause the greatest environmental impact. This is low compared to the 3,000 companies in Denmark and the 10,000 companies in Sweden that are included in the schemes.

Reporting information on the environmental impact of products is required in the Danish and Norwegian schemes while only Sweden requires companies to state whether environmental impacts have an influence on their financial performance.

Overall, it has proven difficult to make conclusions about the effectiveness and efficiency of the schemes in this study. A question that needs to be addressed is whether any of these schemes embody the most efficient way of bringing about desired changes in corporate environmental behaviour or to achieve improved access of the public to environmental information.

Recent recommendations have been made by the European Commission for its member states to take appropriate action to promote the disclosure of environmental issues in the annual accounts and reports of companies. It is hoped that there will be increasing numbers of reporting companies and an improvement of the quality of environmental reports, but as the Iiiee report points out, this may depend not only on direct regulations, but also on indirect and demand stimulatory measures.

An example of this is recent change in pension fund regulations in many European countries that require fund managers to declare how much they consider environmental and social issues in their investment decisions. This should increase the pressure on companies to improve their environmental disclosure practices.

Last month, edie reported on the call from the European Parliament’s Employment Committee for binding rules for environmental reporting by companies. During a debate on a green paper on corporate social responsibility (CSR) reporting, MEPs stated that they were in favour of a voluntary approach to CSR reporting (see related story).

Parliament’s Industry Committee has also already debated the green paper, and rejected a call by Green MEP Caroline Lucas for mandatory reporting, fearing that it would be too demanding for companies (see related story).

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