Environmental reporting is a process through which organisations disclose their environmental performance-related information to their stakeholders that provides accountability for their activities and their resultant impact on the environment, writes Mohammed Fazlur Rahman Khan
THE UN General Assembly on September 25, 2015 started a unique journey of universal development in the name of the Sustainable Development Goals. The SDG came into effect on January 1, 2016 and incorporated 17 goals with 169 associated targets that can be used to frame the national and international agenda to end poverty, fight inequality and injustice and tackle climate change by 2030. The SDG follows and expands on the Millennium Development Goals, which was agreed on by the United Nations in 2000 and expired with the end of 2015.
According to the Bangladesh MDG Progress Report (2015), the country achieved remarkable progress across most of the millennium development goals and wants to be an ‘early starter’ in the implementation process of the SDG. Consequently, the government has enacted important laws, including the adoption of a special Article (Article 18 A) in the constitution of the country regarding conservation of environment and biodiversity, with the objective of addressing environment as one of the three pillars of sustainable development. But these initiatives are not sufficient for achieving the SDG. In this regard, an ongoing study of the Centre for Policy Dialogue has revealed that only eight out of 17 sustainable development goals are better integrated in the existing national prioritisation processes of Bangladesh.
The study further showed that SDG9 (industry, innovation and infrastructure) and SDG12 (sustainable consumption and production) remain the lesser integrated goals in national priorities. But experts believed that these goals are crucial for the survival of the country. In the real sense, Bangladesh has been striving for employment-intensive industrialisation since its independence to ensure optimum employment of its large population. Consequently, the manufacturing sector received serious attention even in the First Five-Year Plan (1973–1978) and grew at a rate of 5 per cent between 1972 and 1992. And in the 2014–2015 financial year, the growth in the manufacturing sector stood at 10.32 per cent, according to Bangladesh Bureau of Statistics data. But in case of accelerating the pace of industrialisation, Bangladesh has not achieved sufficient structural transformation; and insufficient consideration has been given to the sustainable consumption and production. Therefore, the consequence of rapid and largely unregulated industrial development has resulted in many adverse environmental effects in Bangladesh.
The toxic discharge from manufacturing industries pollute both surface and ground water sources. Although there is a requirement from the environment and forest ministry that every factory, discharging chemical wastes, must have effluent treatment plant, many factories continue to dispose their untreated wastes into the rivers. A study of the Bangladesh Society for Environment and Human Development (2011) showed that the treatment of industrial wastes was considered a low priority and the practice of discharging untreated industrial waste into water bodies was almost universal.
More than 200 rivers, thus, directly or indirectly receive a large quantity of untreated industrial wastes. Consequently, many aquatic ecosystems are now under threat and with them are threatened the livelihood systems of local people. In this regard, another survey of the environment department (2011) revealed that acidic emissions from tannery effluents could potentially cause serious respiratory disorders to employees and residents of the area. Thus, industrial development of Bangladesh is taking high toll on its natural resources. But it is not expected to have more corporate profit at the cost of environmental sustainability.
It is, therefore, a timely demand to incorporate environmental responsiveness in manufacturing organisations in Bangladesh to ensure sustainable industrialisation which is specified in Target 9.2 of SDG9 (promote inclusive and sustainable industrialisation…). In this regard, ‘Environmental Reporting’ of the corporate organisation is essentially relevant which is also specified in Target 12.6 of SDG12 but relates to most of the SDG. Target 12.6 of SDG12 specifically advises integration of sustainability information into the reporting cycle of companies. Basically, environmental reporting is a process through which organisations disclose their environmental performance-related information to their stakeholders that provides accountability for their activities and their resultant impact on the environment. It plays a vital role in providing the actual scenario of the company’s environmental performance, which is also necessary for taking any control measure or developing corporate and national policy to achieve sustainable Industrial development.
Consequently, there has been a growth in environmental reporting practices of corporate organisations worldwide. Many countries such as Denmark, Norway, the Netherlands, France, the United Kingdom, the United States, Japan and China have already adopted mandatory legislation on environmental reporting of companies. But corporate environmental reporting in Bangladesh is voluntary in nature. Because, the existing environmental and corporate-related laws and the prevailing accounting and reporting standards do not prescribe any periodical mandatory environmental disclosure by the companies although, according to the Bangladesh Environmental Conservation Act 2015, companies may asked to disclose environmental information as and when required. As a result, only a few companies disclose environmental performance-related information through their annual reports. But the level of environmental disclosures of the companies is not satisfactory. So, it is time to strengthen the financial reporting systems of the organisations that can introduce their real financial performance along with environmental impact of their .
In this regard, the Bangladesh government has enacted a very important law, the Financial Reporting Act 2015, with a view to establishing the financial reporting council to control and oversee the accounting and financial reporting activities of the organisations as well as the accounting and auditing profession of the country. Under the act, the financial reporting council will also be responsible for developing necessary accounting and auditing standards along with their proper implementation. But till date, the government could not establish the council. So, it is essential to take proper initiatives for the establishment of the financial reporting council and impose mandatory legal requirements on organisations to provide their real environmental performance in the annual reports. Besides, the ICAB and/or the FRC should develop industry-wise guidelines for environmental reporting of the organisations on the basis of our corporate and national culture and introduce the best environmental reporting awards among the companies to accelerate their environmental reporting performance.
Legislators, in such a situation, may wish to take into consideration the information needs of stakeholders and the expected ‘themes’ of stakeholders for ideal environmental reporting when relevant standards are formulated in future. Regulators should consider the issues that are related to the potential costs and benefits of mandatory environmental reporting to companies as well as to the community. Besides, the ICAB and/or the FRC should develop necessary guidelines for external verification of corporate environmental information (corporate environmental audit) in order to enhance transparency of their environmental performance and disclosures.
Such initiatives are expected to create a culture of environmental reporting practices among the corporate organisations of Bangladesh which is essential for achieving the sustainable industrial development as well the Sustainable Development Goals.
Dr Mohammed Fazlur Rahman Khan is an assistant professor of accounting at Government Girls’ College in Gaibandha.