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ENVIRONMENTAL REPORTING – AN EMERGING TREND IN CORPORATE REPORTING
SWASTIK SUMAN SATAPATHY1
1Research Scholar (UGC-JRF), Faculty of Commerce, Banaras Hindu University, Varanasi
RAKESH CHANDRA SAHOO2
2Research Scholar, P.G. Department of Commerce, Utkal University, Bhubaneswar, Odisha
Abstract:-Since the industrial revolution in the Europe, the business world has progressed leaps and bounds which has brought many revolutionary transformation in our civilization. But all these developments have come at the cost of environment and excessive exploitation of environment for the resources is one of the major causes that has led to ecological imbalance in the post-modern era. But fortunately, over the time, the companies have started to realize the importance of environment, the main source of the resources and environmental reporting is a tool in their hand to show their genuine concern towards the environment within which they operate their businesses.Corporate reporting, in this globalized business era is of foremost importance as it serves the interest of different stakeholders, such as business owners, managers, shareholders, Government and the public at large. Modern reporting doesn‟t only convey the financial information to the interested parties, but it also provided non-financial information\, in which environmental information and data are considered very crucial as it shows the contribution of the companies to the betterment of environment as a return gift for the resources drawn by them from the environment. In 21st century the concept of “Integrated Reporting” has come to the play which included reporting of PPP i.e. “Profit-People-Planet”. This study throws light on the environmental reporting, as a part of integrated reporting system, which has become an emerging trend in the field of corporate reporting, the legal framework for this, the importance of environmental reporting for companies as well as the people and its practical application in the real world.
Key Words – Environment reporting, GRI, accounting standard, IFRS, environment performance indicator, sustainable, eco-friendly
I.INTRODUCTION
The complexities of modern corporate business sector in this cut-throat competitive era- the invention in modern information technology, the changing global economy, volatile stock market, fast changing modern management style- have all added a new look to the concept of corporate existence in each and every country . Over the time the Companies have
become more conscious regarding the development of society and protection of the environment along with their primary aim of making profit. The traditional profit concept of business has been changed. It is because the companies acquire the resources from the society for their operation to make profit, and with the passage of time they have realized that they have the obligation to
2 return something to society and environment for the sustainable development of the society where they exist as well as their country.
Hence, this obligation of the corporates has made the way for an integrated reporting in respect profit, society and environment.
II.REPORTING – WHAT?
Reporting simply means
“Communicating the information”.
While discussing from corporate point of view reporting can be defined as “A system of communicating information regarding the company, its operations and activities to the stakeholders for taking decisions.”
So corporate financial reporting is the system of making corporate financial reports. But the changing scenario of corporate reporting is concerned with both financial and non-financial performance of the corporates.
(Shukla&Vyas, 2013) The reporting system is meant for the stakeholders of the company. As different stakeholders need different information, different reports are prepared by the companies to be communicated to the stakeholders through annual report at the end of a particular period. Over the year the reporting system has changed a lot and many new type of reports are emerging.
III. IMPORTANCE OF REPORTING FROM DIFFERENT PERSPECTIVES
The reports prepared by a company don‟t only disclose the result of operation during the year, but also disclose much important information concerned with both the financial and non-financial
aspect of the company which are considered to be relevant for decision making. So several reports are prepared by the companies to be presented to different stakeholders having different perspectives for their decision making. In general, the following parties are concerned with the annual reports of a company:
I. Management Perspective – To assess the operational efficiency and management effectiveness from the end result of the operation i.e. profit.
II. Board of Directors Perspective - To take important financial, investment and dividend decisions and make important business strategies .
III. Investors and shareholders Perspective – To assess earning capacity , profitability of the firm and the effectiveness of utilization of their money.
IV. Creditors Perspective – To assess short-term as well as long term solvency position of the company.
V. Government Perspective – To assess the firm‟s compliance with regulatory framework and tax compliance.
VI. Global Perspective – To help the investors to assess how effectively their money have been utilized in the foreign country if the company is having it‟s subsidiaries in a foreign country and to help the potential investors in taking investment decisions in such company.
VII. Societal Perspective – To assess how socially responsible the company is in serving it‟s obligation to the society and what benefit the society is getting from the company and how does it help
3 in overall social development of the nation.
VIII. Environmental Perspective – To assess the company‟s concern for environment and the attempts made for preservation and protection of the environment within which the business operates.
IV.OBJECTIVES OF THE STUDY This study is based on the following objectives:
1. To study the legal framework relating to corporate reporting and position of environment reporting.
2. To study the importance of environmental reporting and examine the environment performance indicators.
3. To examine the environmental reporting practices in Indian and Global context.
V.LEGAL FRAMEWORK
The corporate reporting practice is not something to be done as per the wish of the companies. The reporting practice is strictly governed by the law and each and every company has to follow the legal framework in preparation and presentation of the reports.
Legal Requirements from Indian Perspective:
The corporate reporting system in India is governed by the laws discussed below :
(1) Companies Act, 2013 – The Companies Act, 2013 replaced the Companies Act, 1956 and Section- 129 of this Act deals with the preparation and presentation of financial reports and statements whereas section- 135 deals with the reporting on Corporate Social Responsibilities (CSR) of the company. The Companies Act,
2013 has made the following statements/reports mandatory to be prepared by the companies in India:
I. Statement of Profit and Loss II. Balance Sheet
III. Cash Flow Statement
IV. Statement of Change in Equity V. Statement of Accounting Policies
and Notes to Accounts VI. CSR Report
VII. Corporate Governance Report Some other laws governing the reporting practices in India are – (2) Income Tax Act, 1961 – Section-45
of the Act deals with preparation of profit and loss account for income tax purpose.
(3) SEBI Act, 1992 – Clause-49 deals with listing of securities in stock exchange and segment reporting has been made compulsory under this Act.
(4) IRDA Act,1999- This Act deals with the reporting system to be adopted by the Insurance companies in India.
(5) Banking Regulation Act, 1949- It deals with the reporting of the companies engaged in banking business.
(6) RBI Act, 1934 – It aids in reporting of banking companies.
(7) Electricity Companies Act, 2003- The law deals with preparation and presentation of reports by electricity supplying companies.
Accounting Standards in India:
There are 32 accounting standards in India issued by the ICAI which regulate the accounting practices throughout the country. But AS-8 has been withdrawn and merged with AS-26. AS-30, AS-31 and AS- 32 are only recommendatory in nature. Hence, in practice there are 28 operational accounting standards in India. But a converged set of accounting
4 standards known as Ind AS is coming to replace the present set of accounting standards to give the accounting practice more global touch in India.
Legal Requirements and Accounting Standards from Global Perspective:
Different institutions like IASC, IOSCO, OECD etc. and even the UNO are working continuously to set accounting principles and ensure their effective utilization for better corporate reporting globally.
The most of important of these is the International Accounting Standard Committee (IASC).
I. US GAAP – The United States Generally Accepted Accounting Practices are followed primarily in the US, but this is also globally acceptable and many other countries are using these principles for their corporate reporting.
II. IAS - The IASC has issued 41 International Accounting Standards so far that are accepted and practiced in majority of the nations in the world.
III. IFRS- The International Financial Reporting Standards are 15 in numbers presently which is applied in accounting practices throughout the world simultaneously with IASs. Many countries are either opting for IFRS or merging their standards with IFRS to get a set of converged standards for better global connection of their companies and harmonization of accounting and reporting practices.
VI.ENVIRONMENTAL
REPORTING: AN OVERVIEW The corporate reporting system throughout the world has undergone a sea change due to
increasing global contacts of the countries. Over the time, the corporates have grown in the role of socially responsible corporate citizen instead of only running after profit. As we know the world‟s history has been heavily marked by environmental disasters caused by the companies like Bhopal gas leak incident, Enron oil spill etc.
But with the changing time the companies have realized that they have a role to play towards the betterment of environment within which they operate and their concern for environment can add reputation to them as well as help in long term survival of the company and sustainable development of the country. Hence, many of the companies of the world have started adopting the environmental reporting system.
The modern integrated reporting system focuses on PPP model known as Profit-People-Planet. The planet here refers to environmental reporting. As we know the business can‟t operate in vacuum.
It needs an environment within which it has to carry on its operation. Hence, it is also a moral obligation for the business to serve the environment.
Environmental reporting literally means “Reporting about the environment” .It is a practice of disclosing information regarding the steps taken by the company for preservation, protection and betterment of environment in the annual report of that company. So environmental reporting can be defined as “Public disclosure by a firm regarding its environmental performance information during a year.” (Chatarjee& Mir, 2004)
5 VII. CORPORATE REPORTING
PRACTICES OF
ENVIRONMENTAL REPORT
In most of the countries, environmental reporting is still not a voluntary thing. As it is not voluntary, it depends on the concerned company how they want to disclose the environmental information. But in practice, those companies that are more conscious about environmental reporting refer to the guidelines of GRI for this purpose. (Ragini, 2012)
Disclosure:
Presently there are a few large sized corporates who are using separate environment report while disclosing their annual reports.
But in most of the companies, environment report forms a part of
„Sustainability Report‟ as per the GRI guideline. GRI refers to
“Global Reporting Initiatives”
which is a private independent standard setting body that issues guidelines for transparent disclosure and reporting to be used by the businesses, governments and other institutions throughout the world. As of 2015, 7500 organizations of the world have used GRI‟s guidelines regarding sustainability reporting which includes the environment report.
The companies, who don‟t use separate environment reports, use the director‟s report to disclose the things related to environment.
Environmental Reporting In Global Context:
Companies, throughout the world have grown conscious regarding their obligation towards the environment making the way for environmental reporting. Many
developed countries, organizations, Govt. and private bodies have worked and are working continuously in this regard. Some of such global and institutional attempts are summarized below:
United States and FASB – U.S has
passed Environment
Compensation and Liability Act which restricts the companies in U.S for doing any harm to the environment. The “Statement of Financial Accounting Standards”
issued by FASB has made recommendation for disclose of environmental information by companies throughout the United States.
France – The French Law uses the term “Environmental terrorism” for those willingly causing harm to the environment. The French law has adequate provisions for defending environment from such acts, and it ensures reasonable disclosure by the companies in their annual report regarding their attempt for protection and preservation of environment.
European Union - the EU has formulated the 5th Action Programme that deals with the environmental disclosure.
World Industry Council for Environment also contains recommendation for environmental disclosure.
Developed Countries – Develop countries are mostly using separate environmental report along with their annual report.
Developing Countries – In most of the developing countries environmental disclosure forms a part of director‟s report.
GRI – As discussed above, most of the countries now days are referring to the guidelines of GRI
6 for environmental reporting in form of sustainable reporting.
VIII.CONTENT OF
ENVIRONMENT REPORT AND GRI GUIDELINES
The environmental dimension of sustainability concerns an organization‟s impacts on living and non-living natural systems, including ecosystems, land, air, and water. Environmental
Indicators cover performance related to inputs (e.g., material, energy, water) and outputs (e.g., emissions, effluents, waste). In addition, they cover performance related to biodiversity, environmental compliance, and other relevant information such as environmental expenditure and the impacts of products and services.
Environmental Performance Indicators:
Aspects Core Disclosure To be Made
Material 1.Materials used by weight or volume, and 2. Percentage of materials used that are recycled input materials.
Energy 1.Direct energy consumption by primary energy source. 2. Indirect energy consumption by primary sources
Water 1.Total water withdrawal by source.2.Percentage and volume of total water recycled
Bio Diversity 1. Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas. 2. Description of significant impacts of activities, products, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas.
Emission, Effluents and Waste 1.Total direct and indirect greenhouse gas emissions by weight. 2. Other relevant indirect greenhouse gas emissions by weight. 3. Emissions of ozone-depleting substances by weight. 4. NO, SO, and other significant air emissions by type and weight.
5. Total water discharge by quality and destination. 6. Total weight of waste by type and disposal method. 7. Total number and volume of significant spills.
Product and Services 1. Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation. 2. Percentage of products sold and their packaging materials that are reclaimed by category
Compliance 1.Monetary value of significant fines and total number of non-monetary sanctions for noncompliance with environmental laws and regulations
Table No. 1
To sum up the above things, we can say, the company needs to
disclose the following things in environment report:
7 I. Damage caused by the industrial
unit to the environment in terms of water, soil, air pollution.
II. Activities performed by the company for environmental protection
III. Environmental issues/certificates have to be disclosed to ensure that the company comply with the environmental guideline.
IV. Overall environmental protection expenditure and investment.
V. Company‟s commitment towards environment and future strategies in this regard
VI. Historical emission data and the methods adopted to minimize it.
VII. Company‟s attempt for adopting green marketing system, eco friendly processes of production with minimum pollution.
VIII. The result of company‟s environmental commitments , its impact and sustainability of the society
IX.CASE STUDY –
ENVIRONMENT REPORT OF BHARATI AIRTEL
The environment report of BharatiAirtel forms a part of Sustainability Report. The extract of the report containing information regarding the company‟s commitment to environment is as follows:
Sustainability Report of BharatiAirtel for the FY-2014-15 (The Part of Environment Report
only)
At BhartiAirtel, we believe that doing business responsibly and sustainably is crucial for building long-term growth and stakeholder value. As the digital landscape is fast expanding globally and touching lives in different ways, we are aligning our sustainability
strategy with our innovations in the digital sphere.
Our sustainability strategy revolves around two key imperatives:
A) Community wellbeing and empowerment through multiple initiatives and innovation;
B) Environment protection through green initiatives and judicious resource management.
From small yet significant efforts to large-scale community and environmental initiatives, our objective is consistent. To ensure a better quality of life for all and partner the global movement to combat environmental hazards and climate change.
A. Community Wellbeing &
Empowerment
At BhartiAirtel, we are partnering the government's initiative to empower disadvantaged communities through need-based intervention in the realm of education, employment generation, sanitation, healthcare, disaster management and environment protection, among others. Working for communities, and considering them key stakeholders in our progress, is helping us emerge as an agent of positivity and change for an aspiring nation.
B. Environmental Protection
“More people in the coming decades are likely to be exposed to floods, droughts, heat waves and extreme weather associated with climate change, if businesses and governments do not intensify green initiatives. We are already experiencing globally the early signs of extreme weather conditions. At BhartiAirtel, we acknowledge the reality and continue to focus on green
8 solutions with renewed vigour. We are adopting new technologies and best industry practices to strengthen our green commitment.”
Energy on the Horizon:
Rooftop Solar Energy at Main Switching Centres (MSC)
BhartiAirtel has installed six more solar plants in FY 2014-15, taking the total capacity to about 0.74 MWp, installed at 12 MSC locations. These on-grid solar plants are expected to generate green energy of 1.1 Mn units, reducing emission of 900 tons annually.
Solar and Battery Hybrid Solutions
As a part of the Company's corporate mandate to help protect the environment, it is aggressively implementing green (battery, solar, hybrid, Li-ion and biomass) solutions at its owned sites. Airtel has about 2,800 owned BTS sites in Hexacom Rajasthan and the North East. Over 250 sites have installed hybrid solutions to cut down diesel consumption. This step aims to reduce carbon emissions by 6,000 tons annually.
Trial on New Energy Solutions The Company had a successful pilot of DC Aircon Micro-cooling solution at owned sites. This will help switch off Aircon sites, where critical transmission equipment is installed. The Company has conducted trial on natural cooling unit for Aircon elimination and thermo-electric cooling for 3G sites have been tested.
Green Power Wheeling for Data Centres and MSCs
To further enhance the energy efficiency, Airtel has been implementing the renewable sources of energy like solar, wind
and hydro.
In FY 2014-15, Green Power Wheeling agreements for the procurement of green energy, under open access of 45 Mn units per annum, have been made for three Data Centres at Chennai (Wheeling through Wind Power), Bangalore (Wheeling through Hydro Power) and Noida (Rooftop Solar Power Plant) and one MSC location at Pune.
Green Network:
Conversion of Indoor Sites to Outdooor
During the year, Airtel partnered with its tower companies, which helped convert indoor sites to outdoor sites. Over 12,500 sites have been converted to outdoor, thus reducing the energy consumption of these sites by about 25%. Sites are converted mostly installing FCU for switching off the Aircon, thus making them feasible for installing green energy solutions like solar and Li-ion, among others.
Outdoor Site Deployment
During the year, over 90% of new sites were deployed as an outdoor site, eliminating air-conditioner usage.
New Sites Deployment as Sharer The Company has put up more than two-third sites as sharer site.
This helped reduce energy consumption significantly.
Partnering for Greener Network:
Green Projects with BhartiInfratel
BhartiInfratel (Infratel) has been working closely with Airtel for removing Aircon from sites. This year, over 3,600 sites were converted to outdoor, using FCU and micro-cooling solution,
9 making 6,000 sites outdoor till date.
Besides, Infratel has installed about 700 solar solutions at sites in the current financial year, taking the total to 2,200. Infratel continues to be the leader in solar site deployment across all tower companies in India. In addition, Infratel has tagged 5,500 sites as green sites.
Project Green Cities with Indus Towers
Project Green City was launched by Indus Towers few years back, and over 22,000 sites have been tagged as green sites, until this year. Indus Towers has converted over 9,000 sites in the current year, totalling 13,700 sites outdoor, till date.
Resource Management:
E-waste
The increasing volume of waste
generated by the
telecommunication sector has been a matter of grave concern. Airtel, as one of the leading companies of telecommunication sector, manages both physical and e- waste, generated from its premises.
The Company has adopted a proactive approach by ensuring end-to-end traceability and recycling of waste. Airtel continuously monitors the waste generation at each stage, and track the procedure of waste disposal.
The Company ensures that all electrical and electronic components and even highly inflammable fuels are handled and disposed of responsibly, by registered and licensed recyclers.
In FY 2014-15, over 1,700 tons of e-waste was recycled as per Waste Electrical and Electronic Equipment (WEEE) norms.
E-bills
Airtel deploys the best-in-class digital assets throughout its services. The Company aims to reduce paper usage by promoting the use of electronic billing and online payment methods. Over 65% of Airtel's total post-paid mobile customers have switched over to paperless bills. More than 15% of these customers were converted in FY 2014-15 alone.
1,700 tons+
of e-waste was recycled in FY 2014-15 as per Waste Electrical and Electronic Equipment (WEEE) norms.
X.FINDINGS AND CONCLUSION As we see from the above study, the companies have become more socially responsible over the time and they have started to show their concern for the environment.
But the problem lies in its enforcement. Though many companies, mainly the multinational companies are practicing the Environmental reporting, there are numerous companies throughout the world who are not following any kind of environmental disclosure practice, because environment reporting is still not compulsory for the corporate concerns. Hence, it is the duty of the institutions engaged in improving the corporate reporting system and the standard setter bodies in the national and international level to work in this regard so that some kind of environmental reporting can be followed by the corporates. Some suggestions for improving the environmental reporting practices are as follows :
The environmental reporting practice must be made compulsory
10 for all the large sized organizations, and attempt must be made to have some provisions of environmental disclosure of the small firms.
The environmental accounting and reporting should be treated at par with other reporting activities and attempts must be made globally to maintain uniformity in environmental reporting system.
Environment report should have adequate and enhanced disclosure on negative impacts of the business activities on environment and the attempts made by the company to reverse the impact and protection of environment.
The financial impact of the environmental protection activities must be disclosed in the annual reports.
The company must disclose how eco-friendly and sustainable the company‟s attitude and operations are towards the environment along with its commitment for environment.
Global attempts must be made to follow GRI guidelines on environmental reporting.
To conclude we can say, definitely companies have grown conscious regarding their obligation to environment now days. But Environmental reporting shouldn‟t be confined and treated only as a matter of obligation of companies towards the environment. The corporates should realize that it is their responsibility to contribute towards the development of the environment where they operate.
Hence, it is the high time the
companies must adopt the emerging practice of environmental reporting for a better, qualitative, integrated disclosure about them and overall social and economic development of the society which would result into sustainable livelihood for the citizens of our country as well as of our world at large.
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