PracticeConsultingEC advises members on ‘green’ matters

EC advises members on 'green' matters

The European Commission has issued a formal recommendation to the 15 EU member states on the treatment of environmental matters in company annual reports and accounts.

‘The current lack of a common set of rules and definitions means that environmental information disclosed by companies is often inadequate and unreliable,’ said the commission, making it difficult to assess the importance of environmental legislation on a company and to make comparisons.

The recommendation provides guidance on how to treat environmental information under existing accounting directives; suggests closer co-ordination of separate environmental reports with the statutory annual report and accounts; and proposes that relevant, transparent disclosures should be incorporated into companies’ annual report and accounts ‘in a way that complements the more detailed separate environmental reports.’

The widening scope of environmental legislation can have important financial consequences for companies, says Brussels. Pollution prevention and other protection programmes can cost money while companies could be open to fines for non-compliance and compensation to third parties.

Conversely, revenues could be aided by government financial incentives. At present voluntary disclosure of environmental data is ‘low’, creating difficulties for investors and others.

The Recommendation allows for exemptions for small and medium-sized companies but will apply to banks, insurance companies and other financial institutions.

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Analysts reject environmental reporting

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