Environmental governance for finance directors

An extract from an article written by IEMA's chief executive Jan Chmiel following confirmation that greenhouse-gas (GHG) emissions reporting is to become mandatory for some firms

Following the government’s announcement that FTSE-listed companies will soon be required to report their GHG emissions, IEMA’s chief executive Jan Chmiel wrote an article for the Financial Director, outlining the trends in sustainability reporting and informing company directors about their current and future responsibilities in relation to environmental governance.

Below is an abridged version of the article.

Addressing the green agenda

The development of environment taxes, levies, regulation and now mandatory reporting has the potential to create confusion and build the perception that addressing the green agenda is a burden. On the contrary, the evidence is that embracing sustainability can lead to short-term improvements to profits and longer-term competitive advantage.

To maximise the opportunity it is important to understand the trends driving the reporting and regulatory challenges. By doing so it is possible to deal with both short-term needs and future proof the organisation. The following trends have been growing for some time:

• The changing environment – every business needs to know how it will be affected by climate change across its whole value chain.
• Rising cost – in the UK there are a number of environmental taxes and the government plans to increase the proportion of revenue coming from such taxation. Companies should know how their operations are affected.
• Reputation – the link between environment and reputation has strengthened. Society is driving a need for environmental disclosure.
• Investors – investors have been slow to recognise the need for firms to manage their environmental sustainability, but they are now asking for better and more consistent reporting.
• Company governance – a government cannot micro-manage the way an economy addresses all aspects of the environmental challenge. As a result there will be a greater burden placed on corporate management to take responsibility.

Looking at these trends it is clear that what was voluntary will become mandatory, and what could be managed outside the core will now need to be integrated into the fabric of corporate decision making.