Oil giant BP Amoco has commissioned KPMG to conduct an independent audit of its greenhouse gas emissions, in the first ever environmental audit of its kind.
Despite concerns among auditors and financial directors about how to quantify environmental and social reporting, the move underlines the increasing emphasis on reporting ‘soft’ non-financial information and a tightening-up of internal controls suggested in the Turnbull report.
The audit builds on BP Amoco’s commitment to reducing its greenhouse gas emissions so they are 10% lower than 1990 levels by 2010. KPMG will verify the company’s gas accounting and reporting systems, using established financial and environmental reporting standards.
Units of BP Amoco face annual fines if they breach limits placed on the amount of greenhouse emissions. This will also hit the pay of boardroom directors.
Business units, however, can reduce their overall emissions by trading emissions – as credits – to other units with higher reduction costs.
BP Amoco set up an internal pilot scheme for the trading of greenhouse gases last year and aims to roll this out across the whole company next year.
David Coles, KPMG’s partner responsible for sustainability advisory services, said environmental reporting was transforming the nature of auditing. ‘The degree of rigour for this is tougher than environmental reports because people are putting dollar signs behind information,’ he said. ‘The future of auditing is around companies measuring their performance against the environment.’
But Coles warned that many FDs remained oblivious to the changing nature of financial reporting and risked losing influence within companies as a result. ‘Finance directors are well behind the game,’ he said. ‘They risk being marginalised and no longer being the guys who step into the chief executives’ shoes.’
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