New rules under discussion with accounting standards organizations could require businesses to publish their environmental and social impacts together with their financial disclosures, reports The Guardian. These means businesses would have to account for their impact on local water quality, plants and animals.
These new regulations and standards are now being discussed with both the International Accounting Standards Board (IASB) and the UK accounting organization, according to The Guardian.
The initiative was revealed as a major report, “The Economics of Ecosystems and Biodiversity (TEEB) ,” for the UN was released indicating that companies are causing significant damage to the “living fabric of this planet” and posing significant risks to their own profits.
In December last year, the American Institute of Certified Public Accountants (AICPA) and 14 other global accounting organizations called on political leaders to establish universal accounting standards on financial information related to climate change.
A recent report from Ernst & Young reveals in a survey of more than 1,000 U.S. public registrants with revenues between $1 billion and $100 billion that just 29 companies disclosed an accounting policy related to emissions credits or allowances in their financial statements.
Earlier this year, the Securities and Exchange Commission (SEC) ruled that publicly traded companies must warn investors about any serious risks from climate change to their operations.
Richard Spencer, head of sustainability for the Institute of Chartered Accountants in the UK, told The Guardian compulsory reporting was only one of many ideas such as regulation or voluntary standards that would encourage businesses to change their behavior.
Pavan Sukhdev, the study leader said in the article that exposing companies to such scrutiny would motivate more of them to follow the “leaders” in monitoring and improving their operations.
Joshua Bishop, the TEEB for Business report coordinator and Chief Economist of IUCN, also told The Guardian that better accounting of business impacts on biodiversity will be essential to drive changes in business investments and operations.
A study from Trucost estimates the cost of environmental damage by 3,000 of the world’s biggest companies at about $2.2 trillion in 2008.