Environmental reporting – normative and accounting aspects

Companies are part of society in which they are performing their business activities, so, in addition to achieving their economic goals, they must take into account the impact of their activities on the environment and society as well, which means that, it is necessary to act in a socially responsible and acceptable way, and thus accomplish certain benefits. Due to the obvious changes in the natural environment (e.g. climate change and its consequences, water shortages, air pollution, degradation of ecosystems and ozone layer depletion) and the material effect of the global “life-style” on the environment, there has been an increasing awareness in a lot of countries and societies that the environment and its resources are the major elements that are crucially necessary for the future of mankind. This growing awareness has led on the one hand to the regulatory activities of national and international institutions and on the other hand to the public concerns about environmental issues. As a consequence the concept of “sustainable development” of society was broadly and globally accepted as a core of national and international policy in the early 90-ies of the last century. This more or less global commitment and conviction has, besides other aspects, also drawn attention to the impact of companies` business activities on the environment and the society and has led to the concept that the value of a company should not only be measured according to its financial performance but also to its environmental and social performance of the business, including the positive and negative impacts on the natural and social environment. This performance concept is referred to as the triple bottom line performance and is increasingly considered by the major stakeholders of companies (such as capital provider, suppliers, customers and society in general). Companies need to respond to the expectations of their stakeholders so that they will include the impacts of their business activities on the environment and society in their strategic and operative management systems, as well as their decision making process and their system of external financial and non-financial reporting. Including of these effects in the system of external financial and nonfinancial reporting, i.e. the expansion of the traditional model of external financial reporting with non-financial information is of particular importance, because corporate reporting is crucial for the evaluation of the company by its stakeholders and therefore for its future (financial) success. Information about environmental aspects of the business were firstly disclosed as a part of the annual report, then shortly as a part of the so-called social reporting, then in the form of a standalone environmental report, sustainability report, and recently within an integrated report. In order to define content and form of the above mentioned reports a number of guidelines and regulatory requirements for reporting have been developed by European and international organizations and institutions. At the EU level particularly important are Eco-Management and Audit Scheme (EMAS) established by the European Commission, European Commission Recommendation on the recognition, measurement and disclosure of environmental issues in the annual accounts and annual reports of companies, certain Directives of the European Commission as well as Proposal of an environmental reporting framework issued by Federation of European Accountants, while at the global level Sustainability Reporting Guidelines established by Global Reporting Initiative (GRI) and International Integrated Reporting Framework issued by International Integrated Reporting Council (IIRC) are the most comprehensive guidelines for sustainaibility reporting. In order to improve credibility and quality of disclosed information about environmental (and wider social) aspects of the business, it is important to conduct an audit or assurance of sustainability reports depending on the reporting form, which also caused the development of certain standards such as International Auditing Practice Statement 1010, International Standard on Assurance Engagements (ISAE) 3000 and AA1000 Assurance Standard. While at the EU level and around the world a lot has already been done regarding this matter, and the sustainability reporting level in the world is constantly increasing, for companies which are operating in the Republic of Serbia this reporting concept is the relative novelty, considering that the most of our companies are still trying to find their interest in this area and to become familiar with the sustainability reporting guidelines, reporting methods as well as with the significance of the assurance