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11.vol. 0002www.iiste.org call for paper no. 2_p malarvizhi & s yadav_pp211-232

  1. 1. Issues in Social and Environmental AccountingVol. 2, No. 2 Dec 2008/Jan 2009Pp. 211-232Corporate Environmental Disclosures on the Internet: an Empirical Analysis of Indian Companies P. Malarvizhi Sangeeta Yadav School of Business IILM Institute for Higher Education, IndiaAbstractThe impact of industrialization, on natural resources, human health and environment was notclear till 1960s. Rachel Carson for the first time in 1962 raised important questions about hu-man impact on nature in her book, Silent Spring. With the growing awareness towards sustain-able development, industries and corporations have a major role in environmental degradationand protection thereof. In the past, accounting theories emphasized primarily on financial per-formance. This awareness on sustainable development is visible through varied environmentalmanagement mechanisms practiced amongst companies across the world. Environmental con-cerns are addressed by corporate giants through identification and estimation of environmentalcosts, benefits, investments, assets and liabilities into main stream accounting and reportingpractices, for varied managerial decisions. These focused environmental efforts have sharp-ened and improved the global reporting standards. In India, the incorporation of environmentalcosts and benefits into mainstream financial reporting is at its nascent stage at present - but it iscertain to grow. Indian companies have not yet developed a holistic approach to environmentalreporting, as there is lack of environmental reporting guidelines. On the other hand environ-mental awareness among Indian stakeholders gets strengthened with advancement in communi-cation technology. High propensity of environmental awareness ensures a more cautious ap-proach among Indian corporations to be environmentally responsible. With the advancementof information and communications technologies, global corporate information disclosureshave been on rise through the medium of internet, as confirmed by various recent national andinternational surveys. This research has observed that Indian companies follow diverse report-ing practices on the internet viz., stand alone environmental reporting (satellite accounts) orreporting along with the Annual/Financial Reports, or Sustainability Reporting.Keywords: Corporate environmental accounting & reporting, environmental disclosures,internet reporting, Global Reporting Initiatives (GRI), annual reports, voluntary disclosuresCorresponding Author: P. Malarvizhi, Professor of Accounting, School of Business, IILM Institute for Higher Educa-tion, Lodhi Road, New Delhi – 110 013, INDIA, email: p.malarvizhi@iilm.edu, pmalarv@gmail.com
  2. 2. 212 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232Introduction pectation of stakeholders. Mandatory reporting, how so ever stringent, is noth-Accounting for environment helps in ing but a minimum prescribed reportingaccurate assessment of costs and bene- requirement. Companies around thefits of environmental preservation meas- world aspire consciously for improvedures of companies (Schaltegger, 2000). transparency in disclosure as their coreIt provides a common framework for competence (Williams, 2000). Environ-organizations to identify and account for mental disclosure through internet wouldpast, present and future environmental be the future of scientific reporting. Acosts to support managerial decision- number of recent national and interna-making, control and public disclosure tional surveys have identified increase in(KPMG and UNEP, 2006). The severity growth of companies reporting on inter-of environmental problems as a global net (Isenmann R, 2004). Internet report-phenomenon has its adverse impact on ing is perceived as a powerful reportingthe quality of our life. Measures are be- tool by contemporary reporters. Corpo-ing taken both at the national and inter- rate entities of today are moving towardsnational level to reduce, prevent and socially responsible reporting.mitigate its impact on social, economicand political spheres (GRI, 2002; GRI, Environmental reporting of Indian com-2006). Environmental governance strate- panies can be broadly categorized intogies of many countries require manda- two types - mandatory disclosure andtory corporate environmental disclosure. voluntary disclosure. Preliminary inves-Such mandates facilitate the availability tigation of this study shows that Indianof environmental data in public domain companies practice more of voluntarythrough corporate environmental reports. environmental reporting in the form ofStakeholders of Indian subcontinent too satellite reporting, sustainability report-witness a significant growth in non fi- ing, GRI reporting, internet reportingnancial, corporate environmental per- etc. In year 2001, a country wide survey,formance reporting. the first of its kind, was carried out by Business Today, a business magazine,The emergence of corporate environ- and The Energy Research Institutemental reporting (CER) in India has (TERI, 2001) to understand the environ-been an important development, both for mental practices of corporate India.better environmental management and Findings of the survey revealed thatoverall corporate governance (Banerjee, more than 75% of the sample had envi-2002). Global awareness of stakeholders ronmental policy; about 70% have envi-on corporate environmental performance ronmental audit system; 60% had anhas already made traditional reporting environment department; four out ofredundant. Corporate houses run in to every ten Indian Companies had formalthe risk of loss of faith of their stake- environment certification (ISO 14001).holders, if in future, environmental per- Main objective of this study is to under-formance information is not included in stand the environmental disclosure prac-their main stream reporting (Swift, tices followed by Indian corporate on the2001). Simple adherence to mandatory internet. This research has observed thatenvironmental reporting is insufficient to Indian companies follow diverse report-meet the environmental disclosure ex- ing practices on the internet viz., stand
  3. 3. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 213alone environmental reporting (satellite efforts in harmonizing environmentalaccounts) or reporting along with the protection with economic development.Annual/Financial Reports, or Sustain- In 1991 GOI has made its first publicability Reporting (which include the announcement about the need for envi-economic, environmental and social is- ronmental disclosure in annual reports. Itsues). is encouraging to know, the GOI has pronounced that “Every company shall in the report of its board of directors,Legal Framework for Environ- disclose briefly the particulars of com-mental Reporting In India pliance with environmental laws, steps taken or proposed to be taken towardsAs per Indian Constitution, Article 51A adoption of clean technologies for pre-of Directive Principles “It shall be the vention of pollution, waste minimization,duty of every citizen of India, to protect waste recycling and utilization, pollutionand improve the natural environment control measures, investment on wasteincluding forests, lakes, rivers and wild- reduction, water and other resourceslife and to have compassion for living conservation” well before the ensuingcreatures.” The constitutional provisions “World Summit” at Rio. In addition toare backed by a number of laws – acts, the above notification, companies arerules, and notifications like Factories required to prepare director’s report asAct 1948; (Prevention and Control of per director’s report rules, 1988. FurtherPollution) Act 1974; Forest the companies’ bill 1993 & 1997 had(Conservation) Act 1980; Air proposed the amendment of section 173(Prevention and Control of Pollution) to disclose through its board of directorsAct 1981; Water Biomedical waste report the measures taken for protection(Management and Handling) Rules of environment. There is also a manda-1998; Municipal Solid Wastes tory requirement for Indian companies(Management and Handling) Rules, to report on conservation of energy,2000; Ozone Depleting Substances technology absorption, etc. in accor-(Regulation and Control) Rules 2000; dance with the provisions of Section 217Noise Pollution (Regulation and Con- (1) (e) of the Indian Companies Acttrol) (Amendment) Rules 2002; Biologi- 1956. In India financial accounting &cal Diversity Act 2002. The Department reporting guidelines are issued and gov-of Environment was established in India erned by the Institute of Chartered Ac-in 1980 to ensure a healthy environment countants of India (ICAI). Companiesfor the country. This later became the Act mandates the preparation of annualMinistry of Environment and Forests accounts of companies in accordance(MOEF) in 1985. The EPA with the accounting standards issued by(Environment Protection Act), 1986 ICAI (Chatterjee, 2005). Specific envi-came into force soon after the Bhopal ronmental accounting rules or environ-Gas Tragedy and is considered an um- mental disclosure guidelines, for com-brella legislation as it fills many gaps in munication to different stakeholderthe existing laws. Ministry of Environ- groups, are not available for Indian com-ment & Forest, Government of India panies. There is no mandatory require-(GOI), has brought a number of regula- ment for quantitative disclosure oftory and non regulatory initiatives, in its (financial) environmental information in
  4. 4. 214 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232annual reports neither under the Compa- sustainability and environment for vari-nies Act nor as per Indian Accounting ous strategic reasons. Internet reportingStandards (AS’s) Further more there are is increasingly preferred by companies,23 stock exchanges in India, governed as it has the advantages of easy accessi-by the Securities and Exchange Board of bility, instant availability, cost effectiveIndia (SEBI) Act 1992. Each of these and environment friendly means of dis-stock exchanges has different listing re- seminating information among all stake-quirements. However, there is no man- holders (Unerman, 2004). However hugedatory SEBI listing requirement for In- amount of environmental information ondian companies, from these stock ex- the internet does not necessarily indicatechanges, to disclose environmental in- genuine environmental commitmentformation. Therefore any environmental (Hodge, 2001). Researches have showndisclosure by Indian companies is purely that quantified monetary disclosuresvoluntary. send quality information signals to users of environmental reports (Pleon Kohtes & Klewes, 2005). Internet enables com-Environmental Reporting on panies to cut down disclosure costs inInternet providing global corporate information, helps in distribution of informationGrowth in information technology has online, and with higher frequency, speedrevolutionized global accessibility of and lesser time. Development of inter-required information beyond national net-based disclosures facilitates commu-boundaries. With the onset and unprece- nication between firms and stakeholders.dented growth of internet, globally com- Company web site can act as an idealpanies use internet to disseminate finan- medium for swift and cost effective dis-cial and non-financial information. Inter- closures. Use of internet brings morenet usage in India has increased from 1.4 transparency, removes geographical bar-million in 1998 to 42 million in 2007 riers and access to corporate informationwhich is an increase from 0.1 % of without any selective disclosure as thepopulation to 3.7% of population of the case with printed reports (Gandia, 2007).country (IWS, 2007). Such an impres- Environmental disclosure has gainedsive growth of internet usage in a span significant momentum in today’s busi-of nine years is an important indicator ness management. Impact of business onfor Indian companies to use internet re- the environment is likely to be of in-porting for widespread dissemination of creasing importance for managers overinformation. Exchange of information the coming decades (Frost, 2000). Thisthrough internet is more efficient and research shows that Indian companiesflexible than other channels of commu- exceed their existing legal obligationsnication. Amongst the many modes of and anticipate more future legislation oncorporate performance reporting, inter- environmental issues. Good environ-net has been heralded as a future infor- mental performance is seen to benefitmation disclosure tool (Bolivar and Gar- investors more by reducing risk than bycia, 2003). increasing return. Financial managers, in particular, need to be aware of how envi-Companies have traditionally used print ronmental matters, affect the fundamen-medium of information disclosures on tals of financial accounting and report-
  5. 5. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 215ing (Schaltegger, 2000). An attempt is internet based environmental disclosuremade here to understand the current concludes that multinational corpora-trends in internet environmental report- tions of developed nations prefer digitaling practices of Indian companies. reporting over print medium (Craven and Otsmani, 1999, UNEP, 1999; Wil- liams, 2000).Review of Literature Secondly GRI guidelines provide princi-Over the past decades companies have ples and detailed indicators for reportingrecognized the benefits of environmental on all aspects of CR performance. Sus-reporting. As a result, there was dra- tainability Reporting Guidelines of thematic increase in the number of compa- Global Reporting Initiative (GRI) devel-nies reporting in numerous ways. Early oped through a multi-stakeholder proc-reporters are quick to realize that envi- ess bring in dramatic increase in corpo-ronmental disclosure is more of a gov- rate reporting practices. There are 660ernance and strategic issue than a simple companies spread over 50 countries re-reporting tool (Roome, 1992; Parker, port on the basis of GRI guidelines. This1997; Parker, 2000a). Regardless of the widespread use of international guide-medium of reporting, companies are lines by GRI assures comparability,bound to satisfy country specific/ which is one of the 11 major GRI Re-international reporting standards and porting Principles. Comparability amongrequirements. It is important to under- reports allows stakeholders to identifystand as to how far standard setting im- and differentiate between best and poorproves credibility in reporting through practices. It helps in benchmarking besttwo major surveys. practices among peer group. Dror & Fabrizio (2007) find that the third ver-Firstly a survey by International accoun- sion of GRI guidelines in 2006 has fa-tancy firm KPMG (2005) shows that cilitated more companies to publish CRthere is not just an increase in the num- reporting. Top 250 companies in theber of corporate responsibility (CR) in- Fortune 500 adopt GRI guidelines forformation in annual (financial) reports sustainability reporting. The main driv-but also on the assurance. There are ers of GRI Guidelines, as identified bystandards available for assurance on non Dror are: globalization, corporate gov--financial information like the Interna- ernance, accountability, citizenship, na-tional Standard for Assurance Engage- tional policy, international conventions,ments (ISAE) 3000, and AccountAbil- bridging the gap between sustainabilityity’s AA1000 Assurance Standard. In and financial reporting. These include2005 survey number of companies issu- accounting regulations, financial risking corporate responsibility reports is management and management of intan-approximately 80% representing 21 na- gible assets. Further their study expectstions in comparison to 2002 survey with GRI guidelines to reap the followingonly 50% companies in the reporting benefits such as: improved relationshipsarena. This result supports the wide- with stakeholders; breaking down inter-spread understanding that multinational nal organizational insularity throughcorporations publish more CR than other information sharing; reduction of volatil-national companies. Prior research on ity and uncertainty in share prices; build-
  6. 6. 216 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232ing brand image; and creation of com- Similar work was done by Manuel Pedropetitive advantage. Rodriguez Bolívar (2004) who carried out a study on web based environmentalNumerous research studies were carried disclosures of publicly listed Spanishout in the past both by academicians and Companies. This research analysed theresearchers to assess the level of corpo- use of internet by environmentally sensi-rate environmental commitment; vehi- tive industries and their transparency incles used for communicating their per- corporate environmental reporting. Re-formance (print medium or web based sults showed that the sample firmsdisclosure) and reasons for environ- widely use internet as a channel of com-mental disclosures across companies and munication to manage corporate legiti-countries. Chris & Jill (2007) have used macy and stakeholder pressure, yet therethe theoretical framework of legitimacy remain differences in reporting.theory to understand the association be-tween, companies with environmental Isenmann et al (2007) studied the onlineimpact and disclosure rate. This research reporting for sustainability issuesused both the hardcopy and website dis- through three conceptual elementsclosures to find a positive correlation namely stakeholder information require-between environmental responsiveness ments, XML-based document engineer-and reporting. ing and reporting system. It concludes that more companies use internet forThe use of world wide web (www) as a improving their reporting methodolo-medium for environmental disclosure by gies. The study expects internet report-Australian minerals industry through ing to benefit small and medium compa-three major legitimacy motives nies more, due to its fast, easy, instanta-(maintaining, gaining and repairing) neous cost effective disclosure as itwere studied by Lodhia (2004). Results could reach a wide spectrum of stake-indicate that the full potential and bene- holders.fits of web based reporting has not beeneffectively utilized for environmental Sahay (2004) surveyed the environ-disclosures. Findings suggest that the mental reporting by Indian companies.motive for WWW environmental disclo- The study revealed that environmentalsure is more to maintain their legitimacy reporting in India is unsystematic, piece-than gaining or repairing it. meal and inadequate due to poor envi- ronmental awareness of stakeholders.Web based environmental communica- Further he finds that comparison of re-tion has not yet been recognized as a ports between companies and across sec-strategic consideration while designing tors are increasingly becoming impossi-and developing company websites. Ad- ble due to unregulated and public rela-ams and Frost (2004) carried out a com- tions type of reporting. He concludesparative study of digital environmental that the prevailing environmental regula-communication in Australia, United tion needs rigorous enforcement andKingdom (UK) and Germany. They too implementation.concluded that there was limited use ofwebsites for environmental communica- Probal Dutta & Sudipta Bose (2008)tion by companies. investigated the web based environ-
  7. 7. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 217mental reporting of listed companies in (CMIE, 2007), websites of respectiveBangladesh through a sample of 17 com- Indian companies, related articles pub-panies. They conclude that Bangladesh lished in journals & newspapers.is yet to develop and improve web-basedenvironmental reporting practices. Cor- The scope of this research is exploratoryporate websites are not well structured to in nature. The researchers used a suit-handle the information technology based able combination of content & discoursedisclosure. Further it shows that compa- analysis, in examining the environ-nies follow more of qualitative disclo- mental disclosures of official documentssure by providing only positive details of (digital) and websites. The populationtheir environmental performance. consists of companies listed on Bombay Stock Exchange (BSE) and the sampleThese worldwide studies show a steady comprises of top 24 companies (Table –increase in the use of internet based en- 1), as per Economic Times ranking ofvironmental performance disclosure. It Indian companies (ET ranking of topis important to note that all these prior 500 Indian companies), January 2007research affirmatively suggests that, survey (Economic Times, 2007) basedfirms have not been forthcoming with on market capitalisation. Studies werefinancial disclosure of environmental carried out in the past using market capi-information. India as a developing na- talization, as a measure of firm size fortion is no different from this global dis- environmental disclosure (Debreceny,closure pattern. Monitoring and report- Gray and Rahman, 2002; Craven anding on environmental issues is found to Marston, 1999). From the sample a sub-be limited. set of companies that produce environ- mental report was utilized as it is more likely to be disclosing sophisticated en-Methodology vironmental information in the Annual/ Financial report than non-disclosureGreen efforts of Indian companies are companies. Sample companies are repre-multifold and their environmental per- sentative of major sectors like automo-formances are reported in annual reports, biles, pharmaceuticals, chemicals, oil &standalone environmental/sustainability energy, IT & communications, construc-reports, reporting in official websites, tion and banking having their place ofreporting as per GRI guidelines etc. This incorporation & operation in India orresearch investigates the current state of outside India (Table-4).It is a preemptiveenvironmental reporting of Indian com- assumption that bigger firms would dis-panies on the internet. Due to limited close their environmental performanceresearch conducted in this field, it is im- more than smaller firms (Cormier andperative to study the internet reporting Magnan, 2003, Simon et al, 2005).practices of Indian companies. This re- Based on this, sample companies aresearch used secondary sources of data classified into two major groups namelythat were available in public domain. manufacturing and non manufacturingEnvironmental disclosure information (Table-2). Most recently available An-were collected from varied databases nual/Financial and Environmental Re-namely Capitaline (Capitaline, 2007), ports were used to gather data on publi-Centre for Monitoring Indian Economy cation or non publication of environ-
  8. 8. 218 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232mental information for the financial year Analysis of Information & Find-ending 2007-08. The researchers exam- ingsined annual reports between 1st of April2007 to 31st March 2008 along with their Environmental reporting on the internetdisclosure in their official website ac- is at its nascent stage in India. One of thecessed between, November 2008 – Feb- main issues which early Indian reportersruary 2009. Every report was scrutinized face is lack of environmental accountingindividually from cover to cover for en- & reporting guidelines. Absence of re-vironmental information. Environmental porting standards severely affect theperformance disclosure in Annual/ comparability among reports. ReportersFinancial Report is categorized under are also not clear about their intendedmandatory reporting. Initially a random audience. Results of this survey shows,selection of ten companies was done to that Indian companies extensively useidentify the common sections and sub- environmental reporting on the internetsections within the annual/financial re- as a powerful advertising vehicle. Noneports and environmental topics that are of the companies in the sample disclosediscussed under them. These sections any adverse environmental impact ofand subsections were entered into the their commercial operations. Hencedatabase of environmental disclosure these reporters freely choose and decideparameters (Table-3), for systematic “what and how” to report, leaving theanalysis of remaining reports. This study stakeholders wonder on what issues areattempts to capture the diverse nature of not disclosed and why? (Beattie, 2003).environmental disclosures of Indian Formulation of standard reportingcompanies on the internet. framework holds the key to improve credibility and comparability amongLimitations of the study reports (Ball, 2000). Globally companies are using environmental reports to helpEmpirical research on corporate environ- secure investor confidence (Bhate,mental disclosure is available largely for 2002). Indian companies should under-developed nations and very few is avail- take environmental reporting with moreable for Asian countries. This research is extensive coverage and better qualityprobably one of the very few initial re- information as it can demonstrate a com-search works with respect to internet pany’s accountability to its stakeholders.environmental reporting by Indian cor- It is suggested that Indian companiesporate. Hence the extent of prior re- should work closely with various NGOssearch literature available on internet and government organizations to mutu-reporting by Indian companies is lim- ally benefit each other for better envi-ited. The sample size considered for this ronmental governance.research is too small to generalize andconclude for diverse sectors of Indian The specific findings of this study undercompanies. There is scope for doing fur- various disclosure parameters are dis-ther theoretical and action research in cussed in detail below.this field.
  9. 9. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 219Environmental Policy Health Safety and Environment (HSE)Environmental policy messages under-line the company’s commitment in envi- HSE policy reflects the health and safetyronmental protection activities, though concern of an organization towards itsnot necessarily connected to their pro- employees and general public. The pol-ductive activity. It is a powerful adver- icy statement is an understanding oftising vehicle, which allows a company common acceptable level of risk fromto quickly give its readers a positive im- each potential environmental contami-age of their environmental and social nant to set a threshold limit. HSE is stillcommitment. 46% of companies in the in a preliminary stage, for Indian compa-sample make such disclosure (Figure – nies, if disclosure is taken as an indica-1). Manufacturing (33%) companies tor. Only 33% of Indian companies fromshow highest preference of disclosure the sample make a formal disclosure,for this type of ‘ecological advertising’ which is a meager percentage on the to-in comparison to non-manufacturing tal sample size (Figure – 1 & Table-2).sectors (13%) (Figure – 2, 3 & Table-2). HSE audits are still relatively uncom-A more pertinent question here is ‘Why mon in India. HSE policy disclosure ondo Indian companies resort to voluntary the internet contributes in giving stake-environmental disclosure in the absence holders a greater sense of security thatof mandatory requirement?’One plausi- companies do take care of environ-ble explanation could be due to dynamic mental problems in a best possible way.international economic changes. Global- Qualitative information by itself is notisation has facilitated increased connec- sufficient for stakeholders, though ittivity of India with the world economy. gives an ample description of company’sIndian companies face global competi- commitment to its HSE issues. Qualita-tion in terms of economic efficiency and tive disclosure must be accompanied byperformance that have cross border im- financial information on the conse-plications (Agrawal, 1997). They no quences of environmental problemslonger work in an isolated and protected (ACCA, 2004). Results of this surveyenvironment. Primarily there is huge disclose that 21% of manufacturing andresponsibility on them to be environ- 13% of non manufacturing sectormentally sound and viable attractive des- (Figure – 2&3, Table-2) extensively fol-tinations – for Foreign Direct Invest- low qualitative HSE disclosures. It couldments (FDI’s) and exploration of inter- possibly be due to lack of environmentalnational markets through joint ventures awareness among Indian stakeholders inetc. Secondly environmental policy handling quantified HSE disclosures.statements help in instilling a sense ofcommitment to improve the economic Energy Conservation and Wind En-efficiency of the firm, through efficient ergypollution prevention measures. Soundpollution prevention makes strong eco- Energy forms a significant operationalnomic sense as it helps companies to cost, especially in sectors like heavy andminimise emissions, effluents and waste basic industries (ACCA, 1997). Whereasdischarges, which ultimately leads to banking, information technology andincreased profitability. communication utilize comparatively
  10. 10. 220 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232less energy than heavy industries. 46% ergy source. Information on energy sav-of companies of this survey, report on ings, conservation of energy, renewabletheir energy consumption and conserva- energy and energy efficient products andtion endeavours, mainly addressed to services, are not extensively disclosedstakeholders including environmental by these companies.NGO’s and pressure groups. Of thismanufacturing sector has the highest Corporate Sustainability/Environ-disclosure (33%) as compared to non mental Initiativesmanufacturing sector (13%) (Figure -2&3, Table-2). Companies are experiencing growing demands from a variety of fronts to dis-This research attributes following rea- close their environmental performancesons for disclosure of energy conserva- (Banerjee, 2002). Increasingly, such in-tion and consumption on the internet by formation is being published in a user-Indian firms. Firstly Indian companies friendly format on the Internet. There is(manufacturing) are governed by manda- tremendous variety of disclosure span-tory requirements to disclose energy de- ning through a simple statement of intenttails in the Annual Reports. Secondly or mission, to full statements of policyIndia is an energy stressed economy, and objectives, and moving towards re-where hydro energy generation and sup- ports on performance with statisticalply are inadequate to meet the steep en- back up (Gray, 1993). Indian companiesergy requirements of a growing econ- do not include quantitative disclosure onomy. Alternate source of thermal energy their environmental initiatives. Manyattributes to pollution and associated companies limit themselves to descrip-problems like fly ash management, tive information without disclosing thewaste disposal and pollution control amount of operating expenses and envi-measures. Energy being a critical com- ronmental investments made in a finan-ponent in determining the cost of pro- cial year. 33% of companies in the sam-duction motivates more Indian compa- ple, (Figure – 1) report on their environ-nies to take energy conservation meas- mental initiatives in purely descriptiveures for improved cost reduction. For terms. Companies merely state that ite.g. Bharat Heavy Electricals (BHEL) undertook investment projects related toreports $ 1.47 million in savings during environmental protection activities orthe year 2006-07 due to implementation that it invested in eco compatible pro-of projects in energy conservation jects. Some briefly describe even the(BHEL, 2007). Finally firms that fail to type of process undertaken and the fore-exercise efficient energy management, seen results in terms of emissions reduc-miserably fail in their corporate social tion and/or energy consumption. How-responsibility as well. It would affect ever, this study reveals that sustainableIndian corporate in the long run, in addi- reporting in India has overcome initialtion to adversely affecting the quality of disclosure challenges. Most recentlife of communities in its vicinity. As amendments in the existing environ-per Global Reporting Initiative (GRI) mental protection rules (solid wasteguidelines, reporting should include in- management handling, ozone depletingformation related to both direct and indi- substance regulation, noise pollutionrect energy consumption by primary en- prevention) passed by the GOI along
  11. 11. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 221with corporate voluntary initiatives treatment, transportation and disposal ofstrongly suggest that continued and im- hazardous waste. Public participationproved sustainable reporting is not only along with NGO’s and environmentaldesirable but highly achievable (OECD, activists help in strict enforcement of2005). pollution control rules. However, in or- der to make sound waste managementWaste Management decisions - energy and water use, waste generation in terms of volume and typeIndian firms are able to recognize the of air emissions or wastewater treatmenttrue benefits of generating wealth from and recycling is of particular impor-waste. Results of this survey show that tance. Yet many Indian companies doIndian companies (29%) do report on the not analyze waste from a predominantlyinternet on their waste management environmental view point as they arepractices. Manufacturing sector has the subject to strict environmental regula-highest disclosure rate (17%) as com- tions. Indian companies are geared morepared to non-manufacturing sectors towards regulatory compliance and re-(13%) like Information Technology and porting but appears not to use the infor-Banking, which also generate consider- mation for improved waste managementable e-waste and paper waste (Figure purposes.1,2,3 & Table-2). Yet both these sectorsare equally responsible for generating Water Managementwaste which calls for a greater responsi-bility and commitment. Indian compa- Water is a precious depleting naturalnies are motivated to cost reduction resource. It is an indispensable raw ma-techniques through avoidance and reduc- terial for many manufacturing organiza-tion of waste. They now consciously tions. Water scarcity is the biggest chal-move towards better waste management lenge for Indian economy and compa-practices like recycling, land filling, in- nies must assume social responsibilitycineration etc that are most cost- towards water conservation. GRI sus-effective and have the least environ- tainability reporting guidelines call formental impact. Such waste management detailed disclosure of - water use, per-decisions are based on the magnitude at centage and total volume of water recy-which environmental importance is at- cled and reused, water sources signifi-tached to it. This depends on the envi- cantly affected by withdrawal of waterronmental regulatory regime to which etc (GRI, 2006). India’s faster economicIndian companies are subject to. With development clubbed with responsiblegrowing population and increased indus- reporting practices has elevated the gov-trialization, waste management issue ernance reporting of Indian companiesgains serious importance among Indian to set voluntary bench mark standards.firms. Waste disposal by industries are This is evident from the disclosure ofbrought under scrutiny by Environment water management practices of compa-Protection Act of 1986 which provides nies (33%) (Figure-1 & Table- 2). Waterfor Hazardous Waste (Management and management initiatives of both manufac-Handling) Rules making it mandatory turing and non-manufacturing sectorsfor companies to use specialized equip- (17%) spin around water conservation,ment and services for storage, handling, recycling, rain water harvesting, water
  12. 12. 222 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232reuse, recovery and renewal etc as re- plenishment. This realization amongported by manufacturing companies today’s business world, how so ever late,(Figure 2 & 3). Few of them make vol- drives them to make an honest attemptuntary initiatives towards watershed de- on judicious use of resources, recyclingvelopment of local communities as well. of water, waste reduction etc at their endIn India purchase of land gives owner (Hund et.al, 2004).the right to ground water resources onthat land. Indian constitution guarantees Secondly with globalization, Multina-free use of water and air for all – i.e. tional Companies (MNC) of Europeanboth for domestic and Industrial con- Union, United States of America (USA)sumption. Among these two, corporate and Japan are strengthening their globalhouses consume and pollute more lead- presence in India. These internationaling to wide scale abuse of water in India. companies bring in their responsibleIn general economic parlance “common good practices thereby helping Indianproperty is nobody’s property”, thus wa- companies to set higher internationalter is the most widely misused commod- disclosure standards (Chatterjee, 2005).ity. There is an urgent need for corporate MNC’s do understand their responsibil-accountability towards water conserva- ity to prove them to be socially and envi-tion in India. It is suggested that water ronmentally conscious in India whichconsumption for industrial & commer- has a colonial legacy. For example HLLcial purpose should be priced to curb in our sample seems to be conscious ofwastage and excessive use of water. their public image as reflected in their diverse corporate social activities.Environmental Reporting - The Thirdly economic theories have changedRoad Ahead in the last few years. Earlier theories concentrate on Gross National ProductThere is widespread environmental (GNP) as a measure of economic wellawareness among all sections of society being of a country. Traditionally devel-in India (Jain, 2008). The objective of opment was defined as a rise in GNP, orthis survey is to understand the corporate increase in personal incomes, or ad-environmental reporting on the internet vancement in industrialization and tech-of top 24 Economic Times survey, Janu- nological improvement (Mobley, 1970;ary 2007. This survey attempts to under- Bedford, 1965). Prior to 1970’s, devel-stand the reasons for environmental dis- opment was seen as an economic phe-closure in the light of changing global nomenon measured in terms of GNPbusiness scenario and change in stake- growth. This would either trickle downholder expectations of Indian corporate to generate job and economic opportuni-houses. ties or create necessary conditions for wider distribution of, economic and so-Firstly world over companies now real- cial benefits of growth (Estes, 1972).ize that natural resources (both renew- Gradually there evolved a debate regard-able and non-renewable) are scarce. Re- ing the measurement of economic devel-newable resources cannot keep pace opment in context of high growth rate ofwith the growing demand as the rate of GNP. This gave rise to a consensus to-depletion is faster than the rate of re- wards economic development being best
  13. 13. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 223defined in terms of reduction of poverty, small car NANO has initiated a debateinequality and unemployment for a on the increase in pollution and associ-growing economy (Friedman, 1972). ated traffic congestions it can cause inLack of safe drinking water, highly pol- future. Thus stakeholders of today areluted atmosphere, rivers, toxic emis- well informed and their high propensitysions, chemical spills, massive defores- of awareness on environmental matterstation and climate change cannot be the ensures a more cautious approachsigns of well being of a nation (Marlin, among Indian corporations to be more1973; Gambling, 1971). Industrialization environmentally responsible (Agrawal,unabated resulted in heavily polluted 1997).environment that has adversely affectedour quality of life. There is internationalconsensus that sustainable development Conclusionis of prime importance than unhinderedindustrialization for overall economic Corporate reporting is expanding beyonddevelopment (Chakrabarti, 2005). This financial and environmental perform-message percolates down to the corpo- ance (Kolk A, 2004). There exists sig-rate houses and their stakeholders which nificant interest among Indian corporatemake it impossible for corporations to towards sustainable development whichdismiss and relegate their social respon- is evident from diverse disclosure prac-sibilities to background (KPMG, 2000). tices. A major challenge to reportingFourthly regulatory efforts are geared community at large in India is to im-internationally towards reduction of the prove comparability among environ-quantum of pollution by making it com- mental reports (Skillius, 1998). Most ofmercially viable and an attractive unex- the reports reviewed did not explain howplored profitable business opportunity Indian companies decide on what issues(GRI, 2002). Carbon trading is one such to be addressed or left out in its environ-positive initiative towards abating pollu- mental report. It is left to the discretiontion internationally. Thus corporate must of readers to draw their own conclu-realize that political responsibility of sions. Reporters must give careful con-working for clean technologies would sideration as to how they identify issuesbenefit in the long run. for reporting. This research finds that the sample Indian companies report onlyLast but not the least environmental positive environmental information withawareness among Indian stakeholders virtually no disclosure on their adversegets strengthened with advancement in or negative environmental performance.communication technology. Their More qualitative disclosure in the formawareness and desire to leave an envi- of Environmental policy statement,ronmentally safe world for future gen- HSE, Water & Waste management, Sus-erations, exerts a positive pressure on tainability and Environmental initiatives,Indian corporate giants, to come out Energy management practices etc, arewith, responsible environmental disclo- found to be common among the manu-sure initiatives (Banerjee, 2002). Stake- facturing sector.Environmental disclo-holders are sensitive about the harmful sure is more prevalent among manufac-impacts of industrial activities on envi- turing sector as against non manufactur-ronment. For e.g. the launch of TATA’s ing companies in India. This survey ob-
  14. 14. 224 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232serves that incorporation of environ- The Institute of Chartered Ac-mental costs, benefits and concerns into countants of Scotland, Edinburgh.mainstream financial reporting, in India Agrawal, R. (1997) "Social Reportingis embryonic at present - but it is certain Practices in India", Journal ofto grow (Banerjee, 2001). Involvement Accounting & Finance, Vol. 11,and commitment of corporate account- No. 2, pp. 64-103.ants in environmental management ap- Association of Chartered Certified Ac-pears to be limited due to lack of re- countants (ACCA) (2004) To-gional reporting guidelines (KPMG, wards Transparency: Progress on2006). Government agencies in India Global Sustainability Reportingcould play a more active role in formula- 2004. London: Certified Account-tion of comprehensive reporting guide- ants Educational Trust.line for its rapidly changing business Ball A, Owen D.L. & Gray R.H. (2000)environment. Early reporters of Indian “External Transparency or Inter-subcontinent need encouragement to nal Capture. The Role of Thirdreport fully and regularly, only if coun- Party Statements in Adding Valuetry specific environmental reporting to Corporate Environmental Re-guidelines are made possible. Inviting ports”, Business Strategy and theinputs from stakeholders, while formu- Environment. Vol. 9 No. 1, pp. 1-lating guidelines, will be a valuable 23.means of engaging stakeholders and en- Banerjee, S. (2001) "Corporate Financialhancing mutual interests and priorities Reporting Practices in India", In-(SustainAbility Ltd and UNEP, 1999). dian Journal of Accounting, Vol.Such a bold participative approach 33, No. 1, pp. 1-17.would ensure benefits of enduring value _________ (2002) "Corporate Environ-both to the company and its stakeholders mentalism, The Construct And Its(Isenmann, 2005). To conclude, it is rec- Measurement", Journal of Busi-ommended that revision of existing cor- ness Research, Vol. 55, pp. 177–porate environmental reporting guide- 191.lines in India at par with international _________ (2002) Regulation of Corpo-reporting standards can be considered as rate Accounting and Reporting ina means of encouraging the development India. Calcutta: The World Pressof environmental reporting amongst In- Calcutta Private Limited.dian firms (CSM, 2001). Beattie, V. & Pratt, K. (2003) “Issues Concerning Web-based Business Reporting: An Analysis of the Views of Interested Parties”, TheReferences British Accounting Review, Vol. 35, No. 2, pp.155–187.ACCA (1997) Guide to Environment Bedford, N.M. (1965) Income Determi- and Energy Reporting and Ac- nation Theory: An accounting counting 1997, ACCA, London. Framework. Massachusetts: Addi-Adams, C. A. & Frost, G. R. (2004) The son-Wesley. Development of the Corporate Bhate, S. (2002) “One world, One Envi- Website and Implications for Ethi- ronment, One Vision: Are We cal, Social and Environmental Close to Achieving This? An ex- Reporting through these Media.
  15. 15. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 225 ploratory Study of Consumer En- counting Review, Vol. 39, No. 3, vironmental Behaviour Across pp 197-210. Three Countries”, Journal of Con- CMIE, (2008) Centre for Monitoring sumer Behaviour, Vol. 2, No. 2, Indian Economy Database, http:// pp. 169-184. www.cmie.com. Accessed be-BHEL. (2007) Conservation of Energy. tween November 2007– February Directors Report in the Annual 2008. Report 2006-07. Bharat Heavy Cormie, D. & Magnan , M. (2003) “ En- Electricals Limited. Annexure 4. vironmental Reporting Manage-Bolivar, M. P. R. (2004) “Evaluating ment: A Continental European Corporate Environmental Report- Perspective”, Journal of Account- ing on the Internet: Utility and ing & Public Policy, Vol. 22, No. Resource Industries in Spain”, 1, pp. 43-62. Business & Society, Vol. 0: pp. Craven, B.M. & Marston, C.L. (1999) 0007650307305370vl. “Financial Reporting on the Inter-____________ & Garcia, B. S. (2003) net by Leading UK Companies”, “The Corporate Environmental The European Accounting Re- Disclosures on the Internet: The view, Vol. 8, No. 2, pp. 321-333. Case of BEX 35 Spanish Compa- _________ & Otsmani, B. (1999) nies”, International. Journal of “Social and Environmental Re- Accounting, Auditing and Per- porting on the Internet by leading formance Evaluation, Vol. 10, UK companies”, Paper presented No. 51, pp. 4. at the European Accounting Asso-Capitaline, (2008) Capitaline Database, ciation (EAA) Annual Conference, http://www.capitaline.com. Ac- Birmingham. cessed between November – Feb- Debreceny, R., Gray, G.L., & Rahman, ruary 2008. A. (2002) “The Determinants ofCentre for Social Markets (CSM) (2001) Internet Financial Reporting”, “Corporate Social Responsibility: Journal of Accounting and Public Perceptions of Indian Business”. Policy, Vol. 21, pp.371-394. London/Calcutta. . Dror Etzion & Fabrizio Ferraro (2007)Chakrabarti, S. & Mitra, N. (2005) “Institutional Entrepreneurship “Economic and Environmental through Voluntary Standard Set- Impacts of Pollution Control ting: The Case of Global Report- Regulation on Small Industries: A ing Initiative”, consortium Case Study”, Ecological Econom- i n f o . o r g h t t p : / / ics, Vol. 54, No. 1, pp. 53-66. www.consortiuminfo.org/Chatterjee, B. (2005) “Global Conver- metalibrary/detail.php? gence of Financial Reporting EID=1810&PID=6&ID=26 Standards: Implications for In- Dutta P. & Bose S. (2008) “Corporate dia”, Indian Accounting Review, Environmental Reporting on the Vol. 9, No.1, pp. 29-54. Internet in Bangladesh: An Ex-Chris, J. V. S. & Jill, H. (2007) “A Com- ploratory Study”, International prehensive Comparison Of Corpo- Review of Business Research Pa- rate Environmental Reporting and pers, Vol. 4, No. 3, pp.138-150. Responsiveness”, The British Ac- Economic Times (ET). (2007) “The
  16. 16. 226 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 Changing Face of India Inc.” ET Isenmann, R. & Kim, K.C. (2005) 500 Ranking: p.30 “Progression in Sustainability Re-Estes, R.W. (1972) “Socio-Economic porting: Moving Towards A More Accounting and External Dis- Interactive, Tailored, and Dia- economies”, Accounting Review, logue Oriented Stage”, In Sustain- Vol. 47, No. 2, pp. 284-290. ability Reporting – Concepts andFriedman, M. (1972) Economics and Experiences, Reddy S (eds) pp. 68 Freedom. New York: Nelson. –91. Hyderabad: ICFAI Univer-Frost G. R., & Wilmshurst, T. D. (2000) sity Press. “The Adoption of Environment- Isenmann, R. (2004) “Internet-based Related Management Accounting: Sustainability Reporting”, Inter- An Analysis of Corporate Envi- national Journal of Environment ronment Sensitivity”, Accounting and Sustainable Development Forum, Vol. 24, No. 4, pp. 344- Vol. 3, No.2, pp. 145–167. 365. _________, Bey, C. & Welter, M.Global Reporting Initiative (GRI). (2007) “Online Reporting for Sus- (2002) Sustainability Guidelines tainability Issues”, Business Strat- on Economic, Environmental and egy and the Environment, Vol.16, Social Performance. GRI: Boston, No. 7, pp. 487-501. MA. IWS, (2007). “Internet Usage Stats andGambling, T.E. (1971) “Towards a Gen- Telecommunications Market Re- eral Theory of Accounting”, Inter- port on INDIA”. Internet World national Journal of Accounting Stats. Usage and Population Sta- Education and Research, Vol. 17, t i s t i c s . h t t p : / / No. 1, pp. 1-13. www.internetworldstats.com/asia/Global Reporting Initiative (GRI). in.htm (2006) Sustainability Reporting Jain, L. (2008) Fusion of Corporate Guidelines. Draft Version for Governance and CSR Practices. Public Comment, GRI, Amster- Chartered Secretary, pp. 483-488. dam 2 January 2006–31 March KPMG. (2000), Beyond the Numbers: 2006. How Leading Organisations AreGray, R. (1993) Accounting for the Envi- Linking Values with Value to Gain ronment. London: Paul Chapman Competitive Advantage. KPMG’s Publishing Ltd Assurance and Advisory ServicesHodge, F.D. (2001) “Hyperlinking Un- Center (AASC): KPMG. audited Information to Audited Kolk, A. (2004) “A Decade of Sustain- Financial Statements: Effects on ability Reporting: Developments Investor Judgments”, The Ac- and Significance”, International counting Review,Vol. 76, No. 4, Journal of Environment and Sus- pp. 675-691. tainable Development, Vol. 3,Hund, G., Engel-Cox, J. & Fowler, K. No.1, pp. 51–64. (2004) A Communications Guide KPMG (2005) KPMG International Sur- for Sustainable Development. vey of Corporate Responsibility How Interested Parties Become Reporting 2005, pp.7, 11 & 30. Partners. Battelle: Columbus, KPMG, United Nations Environment OH. Programme (UNEP) (2006) Car-
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  19. 19. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 229 Annexure Table 1 Sample Companies (Data accessed between, November 2008 –February 2009)Name of Company URLAsea Brown Boveri Limited http://www.abb.co.in/Bajaj Auto Limited http://www.bajajauto.com/Bharat heavy Electrical Limited http://www.bhel.com/Bharati Airtel http://www.bhartiairtel.inCipla http://www.cipla.com/Hindustan Lever Limited (Now Hindustan Unilever Limited) http://www.hll.com/Hindustan Zinc Limited http://www.hzlindia.com/Housing Development Finance Corporation Limited http://www.hdfc.com/Indian Tobacco Company Limited http://www.itcportal.comInfosys Technologies http://www.infosys.com/Industrial Credit Investment Corporation of India http://www.icicibank.com/Larsen & Toubro Limited http://www.larsentoubro.comMahindra & Mahindra http://www.mahindra.com/Oil and Natural Gas Corporation Limited http://www.ongcindia.com/Reliance Industries Limited http://www.ril.comSatyam Computers Service Limited http://www.satyam.com/Siemens Limited http://www.siemens.com/Sterlite Industries Limited http://www.sterlite-indutries.com/Sun Pharmaceuticals Industries Limited http://www.sunpharma.com/Suzlon Energy Limited http://www.suzlon.com/Tata Consultancy Services http://www.tcs.com/Tata Motors http://www.tatamotors.com/Unitech http://www.unitechgroup.com/Wipro Technologies http://www.wipro.com/
  20. 20. 230 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 Table 2Environmental Reporting Parameters of Companies Surveyed – (Number of Companies) Non- Manufacturing Total (24) manufacturing (8) (16) Particulars Yes No Yes No Yes No1. Environmental Policy 3 5 8 8 11 132. HSE 3 5 5 11 8 163. Energy 3 5 8 8 11 134. Corporate Sustainability /Environmental 2 6 6 10 8 16 Initiatives5. Sustainability Reporting 2 6 3 13 5 196. Waste Management 3 5 4 12 7 177. Water Management 4 4 4 12 8 168. Wind Energy 0 8 2 14 2 229. Mandatory Requirements9.1 Director’s Report 5 3 11 5 16 89.2 Chairman’s Report 1 7 5 11 6 189.3 Management Discussion and Analysis 3 5 4 12 7 17 Table 3 Environmental Disclosure Index for companies surveyedA Environmental standards & compliance effortsB Health, Safety and Environmental PolicyC Environmental Policy, Environmental Management System (EMS), Environmental Im- pact Assessment (EIA), Environmental AuditingD Energy Conservation and Renewable EnergyE Water conservationF Hazardous Waste ManagementG Commitment towards Pollution control and Global WarmingH Research and Development related on Environmental protectionI Training and Development towards building environmental consciousnessJ Environmental Reporting InitiativesK Signatories to various International Environmental Charters
  21. 21. P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 231 Table-4 Environmental Disclosure of Sample Companies as per Industry Type Industry Disclosure Non-Disclosure Total Number of companiesManufacturing Automobiles 1 2 3 Construction 0 2 2 FMCG 1 0 1 Iron & Steel 2 1 3 Pharmaceutical, Chemical & Energy 6 2 8 (i) Manufacturing Total ……….. 10 7 17Non-Manufacturing Banking 0 2 2 IT 2 2 4 Telecom 0 1 1 (ii) Non Manufacturing Total…… 2 5 7 Total (i) + (ii) ……… 12 12 24 Figure 1
  22. 22. 232 P. Malarvizhi, S. Yadav / Issues in Social and Environmental Accounting 2 (2008/2009) 211-232 Figure 2 Figure 3
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