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Cost Reporting for Climate Change.

Environment has become the focal point of the very existence of human race.Degradation of the environment has been very systematic and rampant over the years that the world today is moving faster towards the point of no return.

Realising this,though very late, governments all over the world are pressing hard for rectification that is holistic at the same time very effective. The transformation in the thinking process is more in the nature of firefighting, where the world was brought to a deliberate brink and then a thought process was induced to act reverse.

Exploitation of nature during these periods went on from Individual level,institutional level,by the society and polity through use of a mechanism of economics.

At this stage when world is thinking in terms of global convergence Institution of governance has started enforcing the idea of prominence to be extended to the climate change for an economic activity.

Not only self-discipline through awareness is a must but also transperant mechanism that reports reversal of acts that destroy environment should be built within the system.

Every activity has impacted the environment at the process level and consumption level,for instance extraction of natural wealth such as coal,gas and metals have impacted the structure of the earth,while its consumption has serious impact on the external environment. Industrial pollutants have been one of the greatest risk that the earth carries today than ever before.Yet unmindful of future exploitation of the natural resource ruthlessly occurs.

Scientist worldover have been talking of cleaner and greener environment while the advantages of economic activity continues,which means any activity that does not impact the Air,Water and space is welcome and should be encouraged in the future.

While this happens the Indian Government has shown keen interest in industry reporting the cost of compliance on climate change issues as visible in this news item below:

Soon, Indian companies will have to compulsorily follow a cost-accounting standard on climate change. The Corporate Affairs Ministry has asked the Institute of Cost and Works Accountants of India (ICWAI) to prepare such a Standard — the first of its kind even globally. This means companies will have to work out costs involved in adopting environment-friendly measures and disclose them. The Government can use this data while taking policy decisions and for climate change talks. The Ministries of Corporate Affairs and Environment will shortly hold discussions on this. The new cost-accounting Standard on environment-friendly measures will be high,

but achievable by Indian companies. The Standard will be on costs incurred for reducing pollution, re-planting forests or restoring mined areas. The ICWAI would seek International Federation of Accountants' inputs. The Standard on climate change could be stand-alone or part of other new cost accounting Standards. Guidelines issued ICWAI member Mr A. N. Raman said the Institute has released management guidelines on environment-related corporate strategies. The Government may link these guidelines to the Standard on climate change to make it mandatory and ask the Board of Directors to disclose if companies are complying. “Climate change is the buzz word in management and cost accounting globally and India will take the lead. Environment-friendly companies will get good grades,” said the ICWAI President, Mr G. N. Venkataraman.

While the standard will be devised by the ICWAI,it is felt necessary that reporting requirements will need to address the following issues:

1.Elements that results in Impacting the environment.

2.The stages at which these elements impact the environment.(Extraction,production- process,stacking,consumption).

3.Identifying and measuring the Impact and assigning the cost of damage to the environment and classifying its reach-short/medium and long term impact.

4.Estimating the cost of reversal or cost of averting. Capital and recurring cost further dividing into direct and indirect.

5.Reporting to various stakeholders on the direct and indirect impact to them.

6.Segregation clearly of cost of reversal and aversion cost.

7.Impact of climate change cost on the prices of the product vis-à-vis long term benefit.(qualitative and quantitative).

8.Risk vis-à-vis return matrix of extracting/producing and consuming the product under consideration.

9.Quantifying stakeholder wise the benefit that accrue by virtue of incurrence of such cost.

Designing of proper formats to present such reports.

R.Veeraraghavan.FICWA.