PUMA TOOK THE BRAVE STEP of producing the first environmental profit and loss account from a global organisation.
It not only put a price on its carbon usage but also represented the cost of future damage incurred from its emissions and water usage.
Could Puma’s leap mean the accounting profession will have to hone its skills to audit and compile green data for all businesses in the future?
Accountants and auditors do not need to rush out in a panic to swot up on environmental auditing skills right away, however, they must be aware that this is a sign of things to come, according to Paul Druckman, former ICAEW president and ex-director for the Financial Reporting Council.
Although some accountants might have antipathy towards environmental information, believing there are more important financial issues to focus on, complacency could see them lose clients as investors call on businesses to provide quantifiable rigour around corporate social responsibility.
The argument for Puma’s strategy and why auditors are likely to need to broaden their skills is compelling.
The environmental profit and loss account allowed Puma to gain a better understanding of its current and future risks in its business and supply chain through a transparent accounting-for-cost approach rather than a narrative.
According to Alan McGill, the PricewaterhouseCoopers environmental partner who worked on the Puma account, stakeholders now have a more accurate picture of the business’ position, having identified where it uses resources so it can act now to minimise future damage and reduce its carbon footprint.
He argued: “Even if you don’t agree with the carbon impact on business and are faced with hard-nosed investors who are only interested in returns, this gives you the information now.
“You can see which business is managed more effectively, which is being efficient with resources and which is driving the organisation forward.”
Although Puma narrowly missed out on releasing the environmental account with its financial reports, the business claims future information will form part of the financial accounts, subject to the same scrutiny from investors as its other year-end figures.
Those questioning Puma’s motives as a publicity stunt should be conscious of more concrete steps being taking in the regulatory environment.
Druckman is currently co-chairman of the International Integrated Reporting Council’s (IIRC) working group. The IIRC comprises accounting’s biggest hitters, such as the chairmen of all the Big Four, Charles McDonough (vice-president of the World Bank), and Leslie Seidman (chairman of the Financial Accounting Standards Board) among others.
His working group is tasked with finding a way to monetise environmental impacts and “integrate” them into financial reports. He said Puma’s effort is a step in the right direction but it is an additional account rather than central to its report, which is the aspiration of the IIRC. The council hopes to release a framework on how to produce an integrated report later in the summer.
One aspect has raised some eyebrows, that PwC not only helped collate and organise the information but audit it as well. How environmental accounting services will fit alongside auditing is an issue to be clarified.
However, the report has shone a spotlight on the accountancy profession and its pivotal role in bringing environmental and financial reports together.
Audit red tape is impacting both ends of the market, according to the latest watchdog stats
EY has appointed Janet Dawson as its global and UK&I government & public sector assurance practice leader
The NAO has made record financial savings for the taxpayer, equivalent to £19 saved for every pound spent, according to its annual report
Given the events of the past week as we enter new territory our SMEs now more than ever need the support of their accountants, writes Bobby Lane