INTRODUCTION:

Corporate Environmental reporting can be defined as a catch-all term that

describes the various means by which companies disclose information on
their environmental activities. It is important to distinguish between the
terms environmental reporting and corporate environmental reports
(CERs).
Corporate environmental reports (CERs) are only one form of
environmental reporting defined as publicly available, stand-alone reports
issued voluntarily by companies on their environmental activities.
Environmental reports can be considered a sort of small world where
many crucial points in the relationship between a company and its
stakeholders meet together.

There can be said to be three categories of environmental disclosures:

1. Involuntary disclosure - the disclosure of information about a
company’s environmental activities without its permission and against its
will. Examples of involuntary disclosures are environmental campaigns,
press and media exposes and court investigations.

2. Mandatory disclosure - the disclosure of information about a

company’s environmental activities that is required by law.

3. Voluntary disclosure - the disclosure of information on a voluntary

basis. There are two types of voluntary disclosures: confidential and non-
confidential. Confidential voluntary disclosures are those required by
banks, insurers, customers and joint venture partners that are not publicly
available. Non-confidential voluntary environmental disclosures are

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practically any environmental information the company voluntarily
makes available to the general public.

PURPOSE OF ENVIRONMENTAL REPORTING:

Corporate environmental reporting serves many different purposes for
different stakeholders.
1. It empowers the people the information they need to hold
corporations accountable, and invites stakeholders more fully into
the process of corporate goal setting.
2. It permits the investor the harness the power of the capital market

to promote and ensure environmentally-superior business

practices.
3. It allows companies and their stakeholders to measure companies

adherence to standards set forth in their statement of environmental

principle, and their various goals and objectives.
4. Environmental risk is the internal part of the risks facing every

organization. Reporting can help to identify such risks, and where

they could arise, and thus prevent damage to reputation from
negative publicity on an environmental issue.

BENEFITS:
The benefits derived from environmental reporting can roughly be
divided in two categories: financial and strategic.
1 Financial-
If a company can demonstrate good environmental performance and an
acceptable level of environmental liability to its stakeholders, it may
benefit financially in that its share price may increase.

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2 Strategic-
Potential strategic benefits include improving the company image and
building better relations with relevant stakeholder groups.

How is it used?

Like financial reporting, environmental reporting forces a high level of

organizational transparency. Senior management often uses
environmental reporting as a mechanism to review environmental
performance and establish targets and action plans for further
improvement. A variety of stakeholders use corporate environmental
reports to assess the performance of companies. Environmental reports
provide insight into how well a company is managing its operations to
reduce risk, avoid potential liabilities, satisfy public and other stakeholder
expectations, and pursue innovative solutions. Environmental reports
provide more than just insight into the environmental performance of an
organization; they offer an understanding of the overall environmental
management framework used by the company. Environmental reporting
is becoming increasingly common, and is now being utilized by several
sectors, including private companies, academic institutions and local
government.

Environmental reports often contain a number of common elements

• Introduction to the chief executive.
• Background information about the organization.
• The organization’s environmental policy.
• The organization’s overall performance with regard to the
environment and frequently broken down into smaller business
sections for large organizations.

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 • Progress made towards specific targets established in previous
reports.
• Setting of targets for improving the organization’s environmental
performance.

Who Uses It?

1. Industry
Corporate Environmental reporting is a mechanism used by companies
across all sectors of the economy to communicate environmental
initiatives and performance to stakeholders. Customers, financial
institutions, investors, insurers, regulators, community groups,
employees, environmental activists, trading partners and other interested
parties are asking companies for more detailed, information about their
environmental performance. Meeting the information needs of these
stakeholders is encouraging the implementation of environmental
reporting by companies. Environmental reporting has become standard
practice in many large companies and sometimes is included with
financial and social information in an overall sustainability report.

2. Government
Governments promote the use of environmental reports by business as a
means of ensuring transparency and responsible corporate behaviors.
Government agencies and departments prepare their own environmental
reports as a means of informing the public of their own operations and
how environmental considerations are taken into account in the decision-
making process.

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3. Financial Community
Banks and insurers are increasingly interested in environmental risks and
liabilities, and are turning to corporate environmental and sustainability
reports to gauge companies’ environmental management and
performance. Companies that demonstrate they are acting to reduce
environmental and social risks and future liabilities can benefit from
improved credit ratings and lower premiums. Mutual funds that utilize
social and environmental screens also use environmental and
sustainability reports to evaluate companies for inclusion in their funds
and to compare a company’s performance against other companies in the
sector.

CHALLENGES:

The important challenges of corporate environmental reporting today can

be summarized in three words: Continuity, Comparability and
Credibility.

1. Continuity
It can be ensured by publishing environmental reports with regular
intervals, by setting targets and reporting back on progress and by using
the same performance indicators over time.

2. Comparability
Comparability is a best achieved by using standardized and normalized
environmental performance indicators. Mandatory disclosure in the
Annual Report and financial statements will also improve the
comparability.

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3. Credibility
It will only be achieved by openness and balanced tone in the report.
Engaging stakeholders in dialogue is an important part of the process.
Verification of environmental reports will only add credibility when the
value of the verification statement is clear and the credibility of the
verifier is higher than the credibility of the company itself.

The challenge facing the business sector is to develop environmental

reporting both as a useful environmental management tool, and as a
means to provide stakeholders with credible information about their
environmental performance.

FLOW CHART OF ENVIRONMENTAL REPORTING PROCESS

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DECIDE TO REPORT

IDENTIFY THE
AUDIENCE FOR
REPORT

REVIEW AND
IDENTIFICATION OF
ENVIRONMENTAL
IMPACTS

PREPARATION OF
ENVIRONMENT
POLICY

GATHER DATA AND

PREPARE
INFORMATION

ASSURANCE
ARRANGEMENTS

FINALISE AND
PUBLISH REPORT

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Trends and Future Importance:

Corporate Environmental reporting has traditionally been a voluntary

method of communicating environmental performance to stakeholders.
More recently, there has been movement towards making environmental
reporting mandatory. Denmark, New Zealand, France and the
Netherlands have already introduced legislation on environmental
reporting. The international environmental management system standard
ISO14001, however, does not specify that company environment
performance data be made public. In India, the practice has not yet
become popular although some companies in the private sector, vis.
TISCO, ITC and a few others have been reporting environmental
performance periodically.

Corporate Environmental Reporting In India:

Regulations
India has no mandatory environmental or social reporting requirement for
public companies, but there are initiatives which encourage such
disclosure. The Securities and Exchange Board of India (SEBI) does not
make any mention of environmental or social reporting requirements in
its “Disclosure and Investor Protection” guidelines.

India’s National Environmental Policy (NEP) 2006, scripted by the

Ministry of Environment and Forests has recommended the use of
“standardized environmental accounting practices and norms in
preparation of statutory financial statements for large industrial
enterprises.” To date, no such standards have been introduced. In
addition, there are several other laws that influence reporting. Under the
Environment (Protection) Act of 1986, each organization

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covered by the law should submit an annual Environmental Audit
Report to its local State Pollution Control Board (SPCB). The
environmental report covers items such as water and raw material
consumption, and although it does not mandate reporting this information
to the public, it forces companies to collect it. The Companies Act
(section 217) also requires companies to report on energy conservation in
the Board of Directors Report. The latest corporate governance code
(2007) for public sector companies requires them to make environmental
and social disclosures in the directors’ report.

Promotion of environmental reporting in India

There are several local organizations that are promoting environmental

reporting. The Institute of Chartered Accountants of India (ICAI) gives
out annual “Awards for Excellence in Financial Reporting.” The criteria
for the award include criteria for environmental and social reporting. The
Confederation of Indian Industry (CII) has established the CII-ITC Centre
of Excellence for Sustainable Development, as well as a Centre on
Sustainability Reporting. This Centre assists companies to initiate or
improve their environmental reporting.

Conclusion
Corporate environmental reporting is expanding beyond financial and
environmental performance. A major challenge to reporting community
at large is to improve comparability among environmental reports and to
involve stakeholders. Environmental reporting is becoming increasingly
common, and is now being utilized by several sectors, including private
companies, academic institutions and local government.