Finance: The chance to clean up

The latest batch of annual environmental reports from some of the country's largest corporations shows a subtle shift of emphasis. Making industry greener is no longer seen as a burden inflicted by our collective conscience but an opportunity to cut waste costs and gain a substantial foothold in what is bound to be an expanding market in waste-reduction technology.

Initially, green reporting was seen as having a twofold significance: it demonstrated a company's commitment to the wider community, while also warning shareholders of the potential for future liabilities from dirty practices. ICI's latest report goes much further by illustrating the opportunities for income generation and waste cost reduction in clean-up activities.

Establishing realistic targets can be vital in forcing change on an organisation across the spread of its operations. But, as ICI has proved, it is equally important to allow flexibility. Annual targets had sought to halve annual wastes, but the company has realised that making toxic wastes non-hazardous is in practice a more significant development. Now benign wastes are a potential sales product instead of a cost.

ICI's green reporting has been an award-winning model, boldly declaring where it has been fined for breaches of regulations, and committing itself to a range of improvements. BT's reports have been equally well received, having twice won the Chartered Association of Certified Accountants' environmental reporting award in four years.

Now BT has published a review of environmental accounting that argues, in a section written by Coopers & Lybrand, the need for standard environmental accounting practices, with a second section from Ashridge Management College examining more advanced green reporting used in the United States.

BT's report points out that the trend towards decentralised budget control can lead to problems and additional expense in defining environmental activity. Yet it can be important to record accurately, not only to make comparisons between businesses but also to predict potential liabilities from pollution damage, particularly in the US. This has led in some corporations to permanent, well-resourced green accounting teams, responsible not only to determine actual costs and benefits but also to review where savings can be made.

The enlightened approach taken by BT and ICI has been backed up this month by an announcement from the Department of the Environment that industrial regulation will be amended to take into account the economic potential of the environment sector. This change of heart has been welcomed by the Environmental Industries Commission, representatives of businesses involved in waste and the environment, which says that for too long the Government has ignored the potential for jobs, profits and exports that can be achieved in the medium term from stiffening environmental regulation.

Adrian Wilkes, director of the commission, says: "The DoE has taken a welcome step towards actively promoting the industry. They recognise that weak regulation undermines the economic benefits that this industry creates." He believes that the Government should now involve the sector more closely in policy development, helping to promote clean industry worldwide.

This comes just days after the establishment of a National Centre for Business and Ecology, based at Salford University and funded by the Co- operative Bank. The principle, again, is that clean technology can give Britain a welcome market advantage, a view supported by an annual pounds 500m trade surplus in environmental products and services. It also recognises, though, the threat from Japan and Germany, which are well placed to dominate the market in the future.

To achieve these benefits, it is essential that industry recognises the existing costs from poor environmental controls, and the potential for savings. Which is precisely why annual environmental reporting can be so important.