Newsletter

June 30, 2004

 

"AIMING TO ENHANCE SOCIAL VALUE OF ENVIRONMENTAL INFORMATION" ChuoAoyama PwC Sustainability Research Institute (CSRI) & ChuoAoyama Sustainability Certification Organization (CASCert)

Keywords: Newsletter 

JFS Newsletter No.22 (June 2004)
"TOWARD A SUSTAINABLE JAPAN - CORPORATIONS AT WORK" ARTICLE SERIES Article No. 13
Staff writer Eriko Saijo

Environmental reports are regarded as an important tool for environmental communications. Since the end of the 1990s, when an increasing number of companies began to publish environmental reports, the needs of both companies and stakeholders to be sure of the credibility of environmental reports has been increasing. Effective communications depend on reliable information.

One of the ways to ensure credibility is to have a "third party review," as specified in the guidelines of Japan's Ministry of the Environment (MOE). An increasing number of companies have voluntarily asked third parties to review and examine their environmental activities, and to publish the results in their environmental reports. According to a survey by the MOE in 2002, among 650 companies that publish environmental reports, 20 percent have already introduced third party reviews, and another 30 percent are considering introducing them.

There are two types of "third party review." One is by NGOs or academic experts, who evaluate companies' environmental activities and express opinions after reading the companies' environmental reports or inspecting their environmental activities in person. The other is by audit corporations, which ensure the accuracy of numeric data and statements of the companies' environmental reports as well as their compliance to standards by verifying the source information and interviewing the people in charge. The method of this type of review is same as with financial auditing, and it is called "third party examination," or "third party verification."

While financial reports are required by law to be audited by certified public accountants, no socially-recognized mechanisms yet exist to ensure credibility of non-financial reports such as environmental or sustainability reports. ChuoAoyama PwC Sustainability Research Institute (CSRI) of Japan has made efforts to establish a new system in society regarding the publication of non-financial reports, by enhancing the credibility and social value of non-financial information.

The CSRI was established in 1999 as a wholly owned subsidiary of ChuoAoyama Audit Corporation, with a strong belief that an audit firm's mission toward a sustainable society is to enhance transparency and reliability of non-financial information to a level equivalent to that of financial information.

What is the meaning of incorporating non-financial information disclosure into a socially-recognized system? The CSRI believes that if non-financial information has an equal social value as financial information, and furthermore, if non-financial information disclosure is institutionalized into society, this will give great momentum to make economic activities more sustainable. Disclosing non-financial information on the basis of a unified standard would make it easy to compare each company's activities, which could result in encouraging companies to engage in environmental activities. The CSRI thinks that if non-financial information becomes more important and more reliable in the society, communications between companies and their stakeholders could become as influential as a general stockholders meeting.

Since its foundation, the CSRI has been working on the review of environmental reports as part of its main service. To further define independence of its review service, it established ChuoAoyama Sustainability Certification Organization Co.(CASCert) in July 2003. CASCert reviewed environmental reports of 17 companies in 2003.

One characteristic of the CASCert's review service is that it gives clients feedback. In a 50- to 100-page report, it summarizes evaluations and suggests improvements identified in the process of reviewing environmental information, and provides the report to clients. Based on the report, clients can improve their information and management system for the coming year. Furthermore, CASCert summarizes the report for general readers of environment reports, and attaches the summary to its review report as "suggestions" to the client. Since those suggestions are not in the scope of the more official "assurance" document, CASCert has more discretion over the content of suggestions. Thus, it makes comments from various perspectives by asking such questions as these: "Is the company enhancing its data collection and handling and monitoring progress?" "Does the company carry out its environmental activities company-wide?" "Is the company trying to incorporate environmental or social aspects into its main business activities?" "Does the company have a long-term vision?"

Companies can benefit from the CASCert's review service more than just assuring information reliability. The involvement of CASCert will positively influence a company's environmental management, and can help accelerate environmental activities in the company. By improving accuracy of environmental information by setting rules for data collection and analysis, the company can conduct annual trend analysis and comparisons with other companies. Thus, it can make management systems work more effectively. Also, in the process, the CRSI requests support documents for data or explains the importance or necessity of data directly to staffs who are in charge of organizing environmental information in each division. This kind of third-party involvement strongly encourages efforts to raise employees' awareness.

The review of environmental information, however, is not intended to evaluate the validity of a client's environmental activities, but rather to ascertain the accuracy of the data and details provided. For that reason, the CSRI has long supported clients' environmental and sustainable management as another pillar of its operations, before its review service was transferred to CASCert. This is because an information review will be meaningless to society even when information reliability is ensured, if the selected information or its framework is of no value.

The CSRI's supporting services are diverse, ranging from creating environmental or sustainable reports, introducing environmental accounting, and managing greenhouse gases, to acquiring ISO certification.

One of the CSRI's advantages is its high degree of expertise on sustainability information in general. The information that corporations disclose is not limited to the area of environment. It expands to areas such as corporate ethics, corporate governance, legal compliance, human rights, labor environment, and contribution to the community and society. The CSRI, which has understood the importance of these areas since its foundation, has a wide network of human resources that can review corporate information on sustainability, such as certified public accountants, consumer life advisors, small- and medium-sized business examiners, and qualified energy managers.

One other strength of CSRI is its global support service using a global network of the PricewatehouseCoopers (PwC) group, of which the CSRI is a member. In recent years, support services for taking measures to improve environmental or human rights aspects in relation to overseas supply chains, particularly those in China for Japanese companies, are attracting attention. When Sony prepared its first global environment report, it used the PwC network to review its overseas sites. That was Japan's first review service covering overseas sites.

Over the last one or two years, the CSRI has been focusing on sending lecturers to voluntary planning seminars and outside seminars regarding sustainable management. They are sent to businesses, industry groups, universities, research institutes, and municipalities, etc. The purpose of the lectures is to provide the audience an opportunity to recognize the importance of information on the environment and sustainability, with consideration of education and awareness-raising. The CSRI is aware that investment in the future through these seminars is also important.

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