Environment & Planning

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Focus: UNCTAD releases new guidelines on corporate environmental accounting

18 May 2004

In brief: AAR's Jim Parker and Dominique Dalla-Pozza provide an overview of a recently released United Nations Conference on Trade and Development manual that contains guidelines for corporate environmental accounting.


The United Nations Conference on Trade and Development (UNCTAD) released A Manual for the Preparers and Users of Eco-Efficiency Indicators in February this year. The manual outlines an accounting method designed to allow information on a company's environmental performance to be reported in relation to financial performance 'in a systematic and consistent manner over periods of time'.1

Why produce guidelines on corporate environmental accounting

UNCTAD notes that information about environmental performance is becoming increasingly important to investors. The Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) began to investigate the topic of corporate environmental accounting more than a decade ago. They found that national accounting standards were not structured in a way that meant environmental information could be readily and clearly disclosed.

In the manual's preface, the Secretary General of UNCTAD acknowledges that it is difficult to prove the extent of any reciprocity between an improved corporate environmental performance and enhanced financial performance.2 This is also a consequence of an absence of an accounting method that allows environmental performance to be measured and reported. In the manual, ISAR attempts to provide an extension of the conventional accounting model, which will allow environmental and financial performance to be linked.

An overview of the manual

The manual has three purposes:

  • to provide methods that allow environmental and financial information to be defined, recognised, measured and disclosed;
  • to provide a standardised format for the reporting of eco-efficiency indicators so that they are useful in the corporate decision-making process, and to allow different enterprises to be compared; and
  • to bolster existing reporting guidelines.3

As the title suggests, eco-efficiency indicators are the central concept for the new standards. An eco-efficiency indicator is 'the ratio between an environmental and a financial variable' .4 However, eco-efficiency indicators have been difficult to construct because of the lack of agreed standards as to how they are to be measured.5 Therefore, the manual represents a step towards creating a standardised form of measurement.

Moreover, the method adopted follows the same logic adopted by the International Accounting Standards. This is an attempt to maximise the utility of the guidance provided by the manual to corporations.

The manual sets out five general environmental issues against which corporations will be able to report their eco-efficiency performance. These are:

  • water use;
  • energy use;
  • global warming contribution;
  • ozone depleting substances; and
  • waste.

ISAR chose these issues because they reflect areas of international environmental concern, and they can be used by any enterprise working in any sector. However, UNCTAD emphasises that the list is 'open ended' and should be adapted by each corporation to cater to the specific environmental issues that they face.6

One section of the manual is devoted to each of these issues. Each section contains relevant definitions of the terms that will facilitate an 'accounting treatment' of the issue. There are also a number of tables in each section. They will assist in the generation of environmental accounting data by providing things such as the Net Caloric Values for Petroleum products and a classification of the type of waste generated.7 The manual also provides guidelines as to what should be disclosed in relation to each of the five issues mentioned above, and provides a suggested disclosure format (with examples).

The final section of the manual outlines the principles that should facilitate the consolidation of eco-efficiency indicators. As with the other sections, guidance is provided as to what should be disclosed in the consolidation. 

Utility for Australian business

As shareholders of Australian enterprises begin to recognise the importance of disclosure of environmental performance, the problems of the difficulties in accumulating, analysing and presenting such data will also grow more acute. The extent to which the model UNCTAD recommends is adopted in Australia, whether by individual enterprises or by regulators, remains to be seen. Nevertheless, the UNCTAD manual is a useful reference guide to companies who wish to present this information in a systematised manner.

  1. United Nations Conference on Trade and Development, A Manual for the Preparers and Users of Eco-Efficiency Indicators, United Nations, New York and Geneva, 2004 at 1.
  2. UNCTAD Manual at v.
  3. UNCTAD Manual at 1
  4. UNCTAD Manual at 1.
  5. UNCTAD Manual at 1.
  6. UNCTAD Manual at 2.
  7. UNCTAD Manual, at 34 & 98.

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