Question

In: Accounting

International Accounting O.J. Sanders works in the financial reporting section of a large U.S. pharmaceutical company....

International Accounting

O.J. Sanders works in the financial reporting section of a large U.S. pharmaceutical company. The company has recently committed to “go green” and O.J.’s boss wants to add some environmental disclosures in the company’s annual report. O.J. is charged with recommending the contents of the environmental disclosure. In his research, O.J. learns that U.S. companies have generally lagged European companies in environmental reporting, but that more and more U.S. companies are now disclosing environmental matters. He believes that his company should at least “match the competition” in the disclosures it makes. Toward that end, he obtains the annual report of Roche, a Swiss competitor. O.J. also learns about the G3 sustainability reporting

4. Describe the environmental disclosures that O.J. should recommend his company make.

Solutions

Expert Solution

INTRODUCTION

Environmental information (EI) must help the society and firms to recognize the impact on the environment of business decisions. The constant need of information from the EI system help managers to identify environmental risks, structure of costs and investments which need a challenge to be faced by firms. The environment could not be defended only by strictly economic results. Indeed, environmental accounting and its reporting are, mostly, made by a voluntary character, especially when they concern the natural environment. The requirements of environmental standards, issued by International Organization for Standardization (ISO) have been the basis to many researches on environmental responsibility. Economic development and the natural environment’s protection are jointly treated and not apart. First, as a qualitative research to understand the meaning that firms and managers have pointed out to the environmental disclosure (ED), how people make sense of their world and the experiences they have in it and second, as a quantitative research to identify concepts, comparable metrics and make statistical treatments to classify as relevant management or accounting as a major challenge.

ENVIRONMENTAL DISCLOSURE

The disclosure of EI is based on the document analysis. Although, ED is already a widespread tendency in large and small and medium firms, it does not address so many issues on their AR. Indeed, it constitutes a challenge to firms whose current environmental focus are presented on monetary terms. corporate AR that, usually, disclose their “good” business practices that ensure the sustainability of the business in order to contribute to the maximization of shareholder value, but nothing related to the “bad” business practices of the environment. The most important challenge to sourcing environmental data is not always data collection per se, but often rather that collected data are too unlike, insufficiently described, and not machine readable and therefore cannot easily be used in national accounts and reports”

Items include on Environmental Disclosure Index

A - Environmental programmes and policies

B - Preventive measures/environmental protection

C - Compliance with environmental regulations

D - Environmental investments/capital expenditures (past and in the current year)

E - Environmental performance/risks and impact on the environment (quantitative information)

F - Environmental indicators

G - Environmental management system

H - Training on the environment

I - External environmental audit

J - Future environmental investment & expenditures

K - Awards and recognition related to the environment

L - Mention of improvements made year by year

M - Mention of an environmental/sustainability report

N - Measurement criteria related with the environment

O - Environmental incentives

P - Environmental expenditures allocated to results (expenses: operating costs)

Q - Environmental capitalized expenditures (investment)

R - Environmental liabilities

S - Environmental contingent liabilities

T - Environmental provisions

U - Fees/penalties relating to environmental issues

V - "Information on environmental matters"


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