Mandatory Environmental Accounting and Reporting

It will soon be mandatory for companies to report measures taken to prevent environmental damage in India. In an effort to boost CSR, the government is working out a comprehensive accounting standard on environmental reporting.

The ministry of corporate affairs is adding detailed norms on environmental sustainability which was a revision of the guidelines for CSR. According to the new rules, prevention of wasteful use of natural resources and scientific treatment of industrial waste will be a top priority. As present, companies are only urged to be environmentally conscious and they are left with no guidelines. This new framework will be clearer in ensuring that all businesses take adequate measures towards environmental protection. "The idea is to make companies responsible for the environmental impact of their products and activities," said a senior official in the ministry of corporate affairs adding that the rule would come into force by the end of the current fiscal year.

The Institute of Chartered Accountants of India is working out a comprehensive accounting standard on environmental reporting to guide companies in the process. Although the norms are voluntary, they will require companies to report their performance in this regard in the form of disclosures in their annual reports. "The review will put in place an implementation format whereby the work can be effectively monitored," said another official, who is privy to the review process.

Many companies devote significant resources towards sustainable development and CSR. Whilst environmental reporting in India is at a nascent stage, it is essential for the government to lay down some ground-rules in order to streamline the process. "While the move to ask a company to report on its environmental sustainability measures is welcome, it could effectively mean that a company would have to comply or explain steps taken," said an official with industry body Confederation of Indian Industry.

This move could enhance the profile of CSR. However there are many worries that it may not promote CSR as a means of encouraging sustainable business but CSR as a means of 'fixing' issues. The previous effort to introduce mandatory CSR was met with vehement opposition. It would be interesting to see what the response will be now.