If we assume, and we usually correctly do, that the primary financial objective of a private sector organisation is to maximise shareholders’ wealth, then it follows that, as part of our everyday work as accountants, we assist with decisions relating to investments, financing, dividends and the management of risk. Very often environmental issues are not seen as a large part of this role.
Green accounting factors in the costs of an organisation’s impact on the environment as part of its overall set of measures. It helps businesses to understand, manage and account for this impact while devising sustainable ways to balance their financial objectives with environmental goals. So why should accountants take interest in this topic? Well there are carrots and sticks for businesses and an accountant with a good grasp of the subject has enhanced value in today’s environment where every advantage needs to be sought and won.
The European Council’s Directives (on Landfill, Air Pollution, Waste Water, Chemicals and Controlled Substances and so on) have been implemented across Europe via regulation and legislation. Businesses have no choice but to conform to these and an accountant must be well briefed in the legislation and regulation that affects his sector.
Government Policies, which may or may not have supporting legislation, can strongly influence the ease or difficulty with which a business can carry out its preferred activities. We can take examples from motor tax being based on CO2 emissions, WEEE obligations on retailers and clawback of subsidies from farmers who surpass thresholds of pollution. Again the astute accountant knows the current policy, understands the impact on his employer and even anticipates changes that may influence future decisions.
The rewards for embracing a Green Culture are many and, rather than simply reaching the standard required by legislation, many companies strive to be the standard setter.
The big four advantages are:
- The products of organisations that are perceived to be more environmentally friendly have a competitive advantage with customers.
- Involvement in environmental issues enhances relations between the business and its local community and can improve its image, and brand awareness, on a national and international stage.
- Many investment funds now include environmental analysis in their decision making process.
- Employee loyalty is enhanced by pride in the environmental work of an organisation.
For many years ‘Green Issues’ have been much maligned but changes in legislation, regulation, subsidisation, customer relations and those crucial investment decisions have brought them front and centre.
The question is: Are you ready to be a Green Accountant?