Abstract
Conventional accounting practices are not sufficient to provide the necessary information demanded by the stakeholders. By environmental accounting and reporting, valuable information regarding the effects of activities of companies on the environment are identified and disclosed. Environmental accounting and reporting have numerous advantages, such as providing a basis for more efficient decision-making processes, optimization of company value, improved corporate image, and increased customer loyalty and investor trust. On the other hand, this chapter mainly focuses on the challenges and threats to environmental accounting and reporting and discusses the possible solutions to the problems identified and recommendations provided by prior literature.
TopEnvironmental Accounting And Reporting
In the United Nations' Conference on the Environment (Earth Summit in Rio de Janeiro) in 1992, an action plan on sustainable development was approved, and the concept of environmental accounting was introduced regarding the implementation of related policies (Council of Europe, 2004). According to the European Environment Agency, “the green growth, in the long term, is the only way to sustain economic growth”. Therefore, the enterprises need to maintain a balance between economic growth and protecting the environment (Ribeiro et al., 2016).
For this purpose, the Kyoto Protocol was signed in 2005 by 175 countries to preserve the climate and reduce carbon emissions. The Paris Agreement, which replaced the Kyoto Protocol (Elmadhoun & Reddy, 2019), is a legally binding international treaty signed in 2015, and 196 parties agreed on the long-term temperature goal of limiting global warming to 1.5ºC by reducing greenhouse gas emissions (United Nations, n.d.)
Accordingly, the World Economic Forum published the Global Risks Report 2022, which identified climate change as one of the most significant global risks and mentioned an average temperature increase of 1.8ºC even in the optimistic scenario. If the net-zero goal is not achieved by 2050, irreversible consequences might be faced.
Key Terms in this Chapter
World Economic Forum: It is a not-for-profit international organization established in 1971 for public and private cooperation. The aim of this foundation is to promote entrepreneurship with high standards of governance and accountability.
Biodiversity (Biological Diversity): It refers to all different kinds of life on Earth, including all animals, plants, and micro-organisms, as well as the genetic information they contain and the ecosystems formed by them.
Ozone Layer Erosion: The ozone layer is a region of Earth's stratosphere that protects human beings and other living things by absorbing the harmful ultraviolet radiation coming from the Sun. The erosion of the ozone layer is the gradual thinning of the layer due to manufactured chemicals, such as manufactured halocarbon refrigerants, propellants, solvents, and foam blowing agents.
Zoonotic Infectious Diseases: These are infectious diseases transmitted from animals to human beings caused by viruses, parasites, bacteria, and fungi. Zika virus, Ebola virus, SARS, and MERS have been classified as zoonotic pathogens which can cause different kinds of illnesses.
US Securities and Exchange Commission (SEC): The Commission is a governmental body that is responsible for regulating securities and exchange markets in the US and protecting investors.
International Organization of Securities Commissions (IOSCO): IOSCO is an international commission of global standard-setting for the regulators of securities markets.
International Integrated Reporting Council (IIRC): IIRC is an organization including interest groups, such as companies, investors, standard setters, and regulators, that is formed in 2010 to promote integrated reporting by publishing a globally accepted framework.