The objectives of Environmental Reporting


"Environment" is used in its widest sense. It means all the external environmental conditions and factors affecting humans, animals and plants. External factors include climate, water, noise, temperature, soil, etc. And the state is empowered to take effective steps to improve environmental factors. Good environmental performance makes good business sense. Companies that measure, manage and communicate their environmental performance are inherently well placed. Information about the environmental impact and operational performance is useful to shareholders in accessing their relationship with reporting entity.

Environmental reporting can be defined as an umbrella term that describes the various means by which companies disclose information on their environmental activities, including corporate environmental reports (CERs), which represent only one form of environmental reporting. CERs are publicly available, stand-alone reports issued, usually voluntarily, by companies on their environmental activities (Brophy and Starkey, 1996).

The first voluntary corporate environmental reports were published in the late 1980s and early 1990s, by, for example Norsk Hydro, Norway's largest industrial group, and the US chemical company, Monsanto. Agenda 21', which was adopted at the United Nations Conference on Environment and Development in Rio de Janeiro in June 1992, encourages business and industry to communicate their environmental performance and to report 'annually on their environmental records, as well as on their use of energy and natural resources' and 'on the implementation of codes of conduct promoting best environmental practice'.

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Organizations engage in environmental reporting as a means to publicly demonstrate their commitment to environmental responsibility and to provide information on their environmental performance and initiatives. In Canada, environmental reporting is voluntary and focuses on the environmental impact of organization-level activity.

Pressure is mounting for companies to widen their scope for corporate public accountability and many are responding by measuring and disclosing their social impacts.

In March 1999, an exposure draft of the Guidelines was released for public comment and as part of a test period with 21 leading international companies.

New laws or voluntary codes may also encourage companies to report. For example a new UK regulation, which came into force 3 July 2000, requires occupational funds to include in their statement of investment principles the extent to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments.

Environmental reporting has known an almost explosive growth over the past years, as various stakeholders have begun to take a greater interest in the environmental performance of the companies.

Environmental reporting is also a key requirement for industrial sites wishing to be registered under the voluntary EU Eco-Management and Auditing Scheme (EMAS). By reporting voluntarily a company can build up expertise in advance of the expected regulation.

Protection of environmental and conservation of natural resources came to be realized at national and international levels and a concern for ecology became a watchword. As the concern for environmental problems increased, the government institutionalized the environmental issues through new legislations and regulations.

Certain guidelines regarding environmental reporting has been issued by many world organizations such as- Federation des Expert compatibles Europeans (FEE), Financial Accounting Standard Board (FASB), Inter-Government working group on International Standard on Accounting and Reporting (ISAR), Accounting Advisory Forum (AAF). Recent research published by the Green Alliance and the environmental consultancy Entec revealed that 58% of company respondents to the second "UK Business and The Environment Trends Survey" were in favor of compulsory environmental reporting. A parallel interview survey undertaken with 50 "opinion formers" showed 72% level of support for mandatory environmental reporting.

An organization use guidelines given in ISO 14001 to improve their Environmental Management System (EMS).

In India 80 companies has been certified for ISO 14001 as an march 1999. Japan has maximum number of companies certified for ISO 14001 compared to any other country in the world.

The voluntary European Eco-Management and audit scheme (EMAS) also require that companies certified to the standard produce environmental statement.

World's top 250 companies now publish their report with consideration of Monetary, Quantitative, Descriptive environmental information.

The UK ACCA award scheme for best environmental report was initiated in 1991. There are award schemes in many other countries such as in Sweden, Denmark, Norway and the Netherlands. The first European Environmental Reporting Awards were presented in May 1997, sponsored by professional accounting organisations in the United Kingdom, Denmark and the Netherlands. Since then several other countries have joined the scheme.

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The regulatory framework governing corporate disclosure in India includes the Companies Act 1956 and the Securities and Exchange Board of India (Amendment) Act 2002. The Companies Act 1956 has been amended several times, and is now known as the Companies (Amendment)/ (Second Amendment) Act 2002.

The Securities and Exchange Board of India (SEBI) Act 1992 has led to the establishment of a Board, to protect the interests of investors in securities, facilitate the development of the securities market, regulate the market of securities, and to provide for the incidents or matters in relation to that. The structure of the Securities and Exchange Commission (SEC) of the US guides the formation of SEBI. The stock exchange regulation of accounting in India is not very dominant till now (Banerjee, 2002).

Environmental reports are now well known as an important instrument in company environmental management and are widely used, especially by large companies in the industrial sector in Europe and North America.

Relevance of the study

It is a new era without any hard and fast standards and benchmark. CER is a mean to environmental improvement and greater accountability and not an end itself. It is a presentation of report to shareholder's to measure the company's adherence to its defined environment policies, goals and objectives to participate in corporate goal setting.

Objectives of the Study

The primary objective of the present study is to analyze the status of disclosure of voluntary environmental information by the companies on the World Wide Web (www.). It further analyses the quantitative and qualitative disclosure on the environmental variables. However, the specific objectives of the study are as :-

To study and develop a theoretical background of the concept of corporate environmental reporting

To study the corporate reporting framework and laws in India.

To analyze company-wise environmental disclosure status.

To analyze industry-wise environmental disclosure status

To analyze the extent and length of environmental disclosure.

To study and analyze the place of corporate environmental disclosure.

Nature of the Study

The present study is analytical in nature. It has been analyse and evaluate the corporate environmental reporting information reported on web sites by the selected companies.

Scope of the Study

The proposed study is based on CER practices of 36 companies. These companies have been selected from S&P CNX Nifty list of diverse industries. The CER information of the following companies have been collected:-


Hindalco Industries Ltd. ALUMINIUM

National Aluminum Co. Ltd. ALUMINIUM


Hero Honda Motor td. AUTOMOBILES

Mahindra & Mahindra Ltd. AUTOMOBILES

Maruti Udyog Ltd. AUTOMOBILES

Tata Motors Ltd. AUTOMOBILES





Infosys Technologies Ltd. COMPUTER-SOFTWARE

Tata consultancy Service Ltd. COMPUTER-SOFTWARE


Hindustan Lever Ltd. DIVERSIFIED


Bharat Heavy Electricals Ltd. ELECTRICAL EQUIPMENT



Larsen & Toubro Ltd. ENGINEERING

GAIL (India) Ltd. GAS

Dabur India Ltd. PERSONAL CARE

Indian Petrochemicals Corporation Ltd.PETROCHEMICALS


Dr. Reddy's Laboratories Ltd. PHARMACEUTICALS

Glaxosmithklin Pharmaceuticals Ltd. PHARMACEUTICALS

Ranbaxy Laboratories Ltd. PHARMACEUTICALS

Sun Pharmaceuticals industries Ltd. PHARMACEUTICALS

Tata Power Co. Ltd. POWER

Bharat Petroleum Corporation Ltd REFINERIES

Hindustan petroleum Corporation Ltd.REFINERIES

Reliance Industries Ltd. REFINERIES

Steel Authority of India Ltd. STEEL AND STEEL PRODUCTS




Data Collection Methodology

Content analysis technique is used to access the extent of environmental disclosure. For this study, web-sites and annual report of the 36 companies belonging to the various industries from the NIFTY-50 companies for the year ended 31st March 2006 have browsed. Thus, information from web-sites and annual reports of different companies has been examined to collect relevant data by using contents analysis. Content analysis is a method of codifying the text or the content of a piece of writing into various groups and categories based on some selected criteria. It involves the selection of analytical categories within the context of the content material. In this study, an indexing procedure based on content analysis has been constructed to assess the extent of environmental disclosure. The purpose of this procedure is to objectively measure the information contained in the disclosure. Disclosure of the following environmental disclosure variables has examined. The environmental disclosure variables have been classified into three categories as specified below. Category one represent variables related to regulatory factors i.e. these variables include in this category regulate the activity of the organization either by awarding the best environmental performer or by penalizing those who damage the environment. Category two represent variables related to accounting. Category third is a general category, includes those variables, which did not fall into any of the previous category.

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Regulatory Environmental Disclosure:- Environmental Audit, Compliance with Environmental Laws, Environmental Awards, Environmental Management System, ISO 14001, Proceeding under environmental laws.

Accounting Environmental Disclosure Variables:- Capital Environmental Expenditure, Revenue Environmental Expenditure, Accounting Policy, Environmental Contingent Liabi


General Environmental Disclosure Variables :- Emission of Air, Water and Land, Clean Technology, Product Design, Natural Resource Conservation, Environmental Research and Development, Training, Waste Management, Plantation.

A rating sheet is developed to measure the extent of voluntary environmental disclosure of the selected 20 variables. Scores has been assigned on the basis of presence and absence of an item of environmental information. While assigning the scores, the quality of disclosure has been also be kept in mind. A score of three is assigned to an item present in the annual report in monetary terms. A score of two is assigned, if the item was present in quantitative terms. A score of one is assigned to the item present in descriptive terms. A score of Zero is assigned to the item not present in the annual report. The score of individual variables in each category has been added to get the total score of each of these three categories i.e. regulatory score, accounting score and general environmental disclosure score. Further, score of these three categories have been added to get total score of the company.

Analysis and Interpretation of Data

The collected information has been thoroughly analyzed and interpretated to make relevant conclusion. The researcher has decided to analyze the information on various aspects on the basis of percentage methods.

A company gets 3 marks for each monetary information, 2 marks for each quantitative information and 1 mark for each descriptive information.


As per table 1, it presents the regulatory environmental disclosure status. It shows horizontally, that maximum companies disclouse descriptive statements in their annual report about environment, but the disclosure of environmental information in quantitative term has lesser score i.e.only 04, because only 2 (5.6%) companies disclose it in their annual report. In vertical form, compliance with law get highest score i.e. 23, but only 5(13.9%) companies reported about the penalties levied under the environmental protection act. It includes only 1(2.8%) company attempts In monetary term and 4(11.1%) companies in descriptive term, because this factormay be the adverse impact on the reputation of the company. the total score of all these disclosure variables is 99.

Table-2 presents the Accounting environmental disclosure status. It show horizontally that maximum 10(28%) companies disclose the monetary status in their annual report about environment. The total score of monetary statement is 54, whereas not even a single company discloses the environmental information in quantitative term. So it has zero value. In descriptive statement, environmental accounting policy has maximum score ie.17, because 17 (47.2%) companies present such information in their annual report. In vertical form, capital environmental expenditure gets highest scores ie.34. Revenue environmental expenditure and environmental accounting policy has equall score but monetary value for environmental accounting policy is zero. So the total score of all these disclosure variables is 87.

Figures in paranethesis are number of companies

Table-3 presents the general environmental disclosure status. All the variables which were not included in regulatory and accounting environmental disclosure are included in general environmental disclosure. It shows horizontally that descriptive statement has highest score ie. 99, in which maximum 23(64%) companiesshow the environmental information about training for their employees and employers. But emission of air water and land has lowest 02 score. Similarly, quantitative statement has almost equall to negative disclosure and its score is 08. In monetary term maximum 09 companies show the environmental information about environmental research and development and its score is highest ie. 27. In vertical form, environmental research and development has highest score is 50. In this status monetary and quantitative statements has almost negative score. The total score of all these variables is 143.

The circle shows the category wise disclosure status. It has been divided into three parts on the basis of voluntary environmental disclosure tables. These three parts are regulatory, accounting and general environmental disclosures which is indicated through different colours such as regulatory disclosure represented by purple,accounting disclosure represented by red and general disclosure represented by yellow.these categories indicate the score of environment information which is disclosed by the companies in their annual report.

Table 4 represents the company wise disclosure status. It shows that, the level of disclosure of voluntary environmental information turned out to be very discouraging. Very small number of companies was reporting for this information in their annual reports. Only 18 (50%) of the disclosure companies falling under thelowest percentage score category. Whereas only 2 (5.6%) companies falling under highest percentage score category. However, good environmental disclosure was found in the annual reports of Reliance, Ranbaxy, ABB and Mahindra & Mahindra.

Industry wise Disclosure of Environmental Information

In this study information environment is divided into two parts as per industries:

Polluting industries

Non polluting industries

Polluting industries include- Hindalco industries ltd., Bajaj Auto ltd., Mahindra & Mahindra Ltd., Maruti udyog Ltd., Tata motors Ltd., IPCL, ABB, BHEL, Simens Ltd., Larson & Toubro Ltd., Sozlon Energy Ltd. Etc.

Non polluting industries include- HCL Technologies Ltd., Tata Consultancy Ltd., Infosys Technologies Ltd., Dadur India Ltd., Bharti Airtel Ltd., VSNL, Tata Power Ltd., Hindustan Lever Ltd., Reliance Industries Ltd. Etc.

Major Findings

The present study revealed that maximum companies are aware about the environment of their business, but not even a single company that represent all the environmental variables in their report.

From the study of environmental variables, it can be seen that a very small number of companies indicates environmental information in quantitative term, and in case of Accounting Environmental Disclosure, the score of quantitative information is zero (0).

It is found from the study that maximum 29 companies indicate the amount incurred on the research and development of environment. In case of General environmental variables, highest score for information on environmental research and development is 50.

The status of voluntary environmental disclosure was found to be better in low polluting industries than in the high polluting industries. The status of voluntary environmental disclosure was found to be better in the personal care industries, Electrical Equipment, Refineries and Cement industries. However, no disclosure of environmental information was found in the annual report of the petrochemical industries.

It is revealed from the study that disclosure on emission of air, water & land has lowest score in general environmental disclosure that is 2 only.

ISO 14001 is an assurance that organization has an Environmental Management System (EMS) that manage its environmental issues but as per study only 18(50%) companies shows such guidance in their annual report.

In regulatory environmental disclosure 21 companies follows the rules of environment as per compliance with law but only 07 companioes legally follows these rules as per proceeding under environmental laws.

As per study only 12 companies audited their environmental issues to reduce the riskwhich is posed by an organizational activities to natural resources as well as to human health and safety, but not even a single company disclosed the results and reports of audit in their annual report.

Environmental expenditure is of capital nature. Only 14 companies disclosed in their annual report about capital environmetal expenditure, but it gets second highest score ie. 34 because maximum 10(28%) companies express it in monetary term.

A very small amount of companies shows the sum of amount incurred by them on environmental information except research & development and capital environmental expenditure. Only 02 companies explain about the amount incurred on the training of their employes.

So far as, the status of disclosure of variables was concerned, environmental research and development, training of employees, natural resource conservation, capital environmental expenditure and compliance with environment laws were found to be the most frequently reported disclosure variables. The least reported disclosure variables were found to be the penalties under the environmental laws, emission of air, water and land, and waste management.

In our survey of selected companies, the most favored place for the disclosure of voluntary environmental information was found to be the Director's Report i.e. almost 67% companies.

Out of these selected companies, no disclosure of environmental information was found in the annual report of Maruti Udyog ltd. from automobile industries and Indian Petrochemicals Corporation ltd. from petrochemical industries.

The company wise status of voluntary environmental disclosure was found to be very discouraging. No company could score even 50% of the maximum assigned score. However, the status of environmental disclosure was found better for the companies viz. Reliance, Ranbaxy, Mahindra & Mahindra and ABB companies.


The protection and development of environmental and natural resources become an important task for the development of each business unit Hence, it is recommended that corporate sector should improve the environment, and help to safeguard the forests and wildlife of the country according to the government policies. Ii is also suggested that every company should disclose, through its board of Director's report, the measure taken for the protection of environment and a number of other regulatory and non regulatory inititatives taken in the direction of environmental protection.

In all the manufacturing and non-manufacturing companieseffective and accurate information about environment plays a remarkable rolein the success of the entire business. It is also suggested that all the companies should disclose maximum information either in monetary or non-monetary term about the environment in their annual report so that third parties may easily analyse the environmental performance of the business unit.