Businesses may soon have to publish details of their environmental and social impacts as part of their annual (financial) accounting procedures.The new proposals are being discussed amongst leaders of international environmental and financial bodies, including the International Accounting Standards Board (IASB) and the UK Accounting Standards Board (ASB, part of the Financial Reporting Council).
Pavan Sukhdev, leader of the G8+5 commissioned “TEEB” (The Economics of Ecosystems and Biodiversity) study group, said he was in discussion with both UK and International accounting boards about the introduction of new regulations which would require companies to publish information such as freshwater use, ecological impact and waste. Sukhdev explains that taking such an approach would motivate businesses to keep up with the leaders in these environmental performance areas and prevent other businesses “free-riding” on the benefits1.
Whilst there have still not been any decisions made on the matter, there has been interest in the idea within the UK’s Accounting bodies. The Institute of Chartered Accountants’ head of sustainability, Richard Spencer, commented on the matter after the talks:
We’re not talking about something weird or funky; we’re talking about doing business better. This is absolutely central to what accountants do.2
International and national regulators are starting to realise that the true costs of doing business are often far greater than initially expected once environmental impact is taken into account. This has brought about a plethora of business theory such as the “Triple Bottom Line” which emphasize the inclusion of ecosystems in the business cycle.
Indeed, the TEEB report suggests 10 Market Opportunities for businesses and estimates their value at around £43bn, growing to over 1.3tn by 20503.
Whilst these accounting regulations may not yet be introduced, it is clear that industry leaders will emerge as those businesses that help define best practices and work cooperatively with the respective regulatory and legislative bodies. Together they will shape the legal frameworks in which we work, and maximise their market advantage as pioneers in this space. The rest will have to follow.
