The International Institute for Industrial Environmental Economics at Lund University

Continuity, Credibility and Comparability: Key challenges for corporate environmental performance measurement and communication

Introduction & Background

Aim and scope of the report

This report, aimed at both individual companies and organisations representing company stakeholders and policy-makers, summarises current trends, problems and developments in the areas of Environmental Performance Indicators (EPIs); Environmental Reporting; Environmental Performance Ranking; and their interconnections as a contribution to enhancing the eco-efficiency of companies. There is also a supplementary report focusing on environmental reporting and small-and medium-sized-enterprises (SMEs).

Relationships between environmental management tools

There are interrelationships between the various environmental management tools that need to be acknowledged in strategic environmental management, even though they have all not yet been clearly identified. In many cases companies have launched projects involving environmental management systems, environmental auditing, environmental accounting, life-cycle assessment, environmental reporting, development of environmental performance indicators (EPIs) and environmental benchmarking etc., without reflecting on the interrelationships between them and the potential synergetic or counteractive effects they could have on each other.

Some of the interrelationships are quite self-evident in the light of the saying “you manage what you measure”. Environmental reporting promotes improved environmental performance by forcing companies to measure their impacts and communicating them to the stakeholders. To effectively manage and measure the environmental impacts the company needs an environmental management system. The environmental management system provides quantitative data on environmental performance to be included in environmental reporting, but there needs to be agreement on standardised and normalised environmental performance indicators to improve the credibility and comparability.

This report has been structured following the ideal chronology of environmental reporting presented in the UNEP/SustainAbility 1996 report “Engaging Stakeholders” (see below). How environmental issues can be integrated in financial accounting is addressed in chapter 2 “Environmental Issues and the financial sector”. Chapter 3 focuses on the need for standardised and normalised environmental performance indicators. In chapter 4 current issues and challenges for environmental reporting are explored in depth and the issues surrounding verification addressed. Environmental Management Systems and Environmental Auditing are not addressed in this report, except indirectly. The current practice of environmental benchmarking in the form of environmental performance rating / ranking is described in chapter 5.

As is stated in the UNEP/SustainAbility (1996) report initial efforts would logically first have been focused on developing appropriate environmental accounting methodologies for measuring performance and then installing full management structures and systems for auditing against these, before a company starts to report externally on their environmental performance. Unless this ideal chronology is followed, verification and environmental benchmarking activities are next to impossible or at least very difficult. Only by implementing this entire framework will the Continuity, Comparability and Credibility of corporate environmental reporting and performance ranking be able to be substantially improved.

This holistic approach is the only practicable one for the future in light of the international standards for environmental management systems and auditing; the current initiatives to standardise environmental performance evaluation, environmental reporting and verification; as well as the rising awareness in the financial sector and subsequent need for environmental performance benchmarking tools. Below you will find a short introduction to the areas Environmental/ Full Cost Accounting; Environmental Performance Indicators; Environmental Reporting; and Environmental Performance Rating / Ranking, which will all be expanded on in the following chapters.

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