Green accounting standards vital for development projects
December, 07th 2007
Appraisal of development projects and green accounting standards are important as appraisal from the environmental angle has assumed a major significance.
Speaking on Management Accounting Driving Stakeholders Value at the Southern Regional Cost Convention 2007 here, organised by ICWAI, Dr M.P. Sukumaran Nair, Managing Director, Travancore Cochin Chemicals Ltd (TCC), said environmental issues, unlike others, have a global dimension in the sense that they transcend geographical boundaries.
Public perception the world over has resulted in building mechanisms such as the IPCC and the Kyoto Protocol, he said.
There may be a difference of opinion on the strategy for greenhouse gas (GHG) reduction but it has to be achieved at any cost, he said.
Sir Nicholas Stern, Head of the Government Economic Service and Adviser to the UK Government on the economics of climate change and development, has brought out the Stern Review on the Economics of Climate Change depicting Economic and Environmental impacts of climate change, he said.
The American Congress has also changed its initial stand and promulgated Americas Climate Security Act to tackle the problem from an American view point.
Taking the issue of power generation, he said that worldwide, the power sector is currently responsible for 41 per cent of global energy-related CO2 emissions and projections suggest that electricity demand will double by 2030.
It is crucial to meet increased demand for electricity at an affordable price and ensure adequate return while contributing effectively to climate change mitigation.
Electricity consumption must, therefore, be more efficient and supply less carbon intensive, Dr Nair said.
This is an enormous and urgent challenge for businesses, industry, and governments. Hence, there is an urgent need to address these issues with a greater concern in the interest of future generations, Dr Nair said.
Earlier, project appraisal was mostly done on considerations such as technology, raw material, and financial return. Environmental impacts were of lesser importance to project planners.
There are several international protocols, conventions and other initiatives to address major environmental issues such as climate change, global warming, water scarcity and quality degradation, soil degradation, accumulation of toxic wastes, forest cover depletion, pollution from industry, and urban livelihoods.
In several parts of the world there are incidences of outbreak of severe environmental diseases such as SARS and chikungunya, he said. Invariably, they result in huge economic impact and tarnish the corporate image of entities.
The Corporate Accounting Standard provides standards and guidance for companies to prepare a GHG emissions inventory at the organisational level. Although the Corporate Accounting Standard and Project Protocol address different business goals, policy and regulatory contexts, and GHG accounting concepts and issues, they are linked through the use of common accounting principles.
In both, the principles of relevance, completeness, consistency, transparency, and accuracy are applied in their appropriate contexts. The application of these principles is intended to ensure credible accounting of both corporate GHG emissions and project-based GHG reductions.
Green accounting is, thus, important in the matter of all development projects in future, he said.