Economic Analysis & Business Planning
- Environmental cost accounting
- Value-focused accounting
- Incorporating Sustainability into Financial market Analysis
Environmental Cost Accounting
Following the financial market fall-out that resulted from the dot-com boom and bust cycle and the “creative” accounting practices adopted by Enron, Tyco and Worldcom, a host of new controls designed to restore public confidence in disclosure, transparency, and materiality were introduced by governments around the globe. Notable among these are Sarbanes-Oxley Act of 2002 (Pub. L. No. 107-204, 116 Stat. 745, also known as the Public Company Accounting Reform and Investor Protection Act of 2002.
Since then, corporate governance reform efforts have focused around ensuring that the concept of corporate responsibility is transformed into practice. In many cases this means enlarging the scope of conventional financial reporting to include non-financial information such as that relating to environmental and social issues.
Financial reporting and disclosure requirements are changing rapidly. In most cases traditionally trained accountants and financial analysts are poorly equipped to understand these issues, especially when they relate to intangible assets; and with the stakes so high, an organization call ill-afford to make mistakes in these increasingly vital areas. Being able to understand the foundation of provision, contingent liability and impairment allowances provides clients with accurate data to move business decisions forward.
In short, we can use our in-depth understanding of environmental issues as well as the related social and financial aspects to assist our clients navigate these treacherous waters with confidence.
North America is rapidly moving towards a service and information-based economy. That means that the true value of a company is based on conventional tangible assets as well as intangibles and therefore, getting harder to value. For some companies, intangible assets - such as human capital, brand and reputation, or environmental capital - may account for up to 80% of the value of a company. In the case of environmental capital, this includes components such as environmental quality and restoration costs, 'externalities' or social costs, future liabilities, and perceived environmental risks.
During the last several years has been fundamental shift in the types of information contained in Annual reports. Increasingly, a greater number and variety of companies are adopting “triple bottom line” accounting practices and reporting on sustainable development activities. Sustainable development reports highlight a host of wide-ranging issues and link diverse functions within an operation; however, capturing the value of triple bottom line reporting requires both range and depth of knowledge. Our understanding of environmental issues and related social and economic aspects ensures that there is balanced, transparent, and responsible coverage of the issues that matter to stakeholders.
Sustainability and the Financial Markets
The financial markets are now showing real interest in incorporating sustainability indicators into stock performance evaluation – particularly in Europe – but this is also happening in North America as well. Direct links between stock performance and sustainability are hard to prove, but what is clear, is that well-managed companies take sustainable development and Corporate Social Responsibility seriously and build around it.