The Impacts of Business over the Natural Environmen - Literature review Example

? Selected Topic Module Part A) Tucker’s 5-question Model Many business decisions have elements of ethics (Campbell, 2008). In order to assess those ethical elements, Tucker has introduced 5-question model: Is it profitable? It is legal? It is fair? Is it right? Is it sustainable or environmentally sound? Is it profitable? Yes. For Azerbaijan, Georgia and Turkey, the BTC project would bring $150bn over the next 20 years. Is it legal? From the BP point of view, the BTC project looks legal as it has made Host Country Agreement with Turkey. In addition, presumably Georgia and Azerbaijan have not shown anything that highlight the presence of illegality in the project. However, Amnesty International, Friends of Earth and Bank Watch have accused BP of making the Host Country Agreement with Turkey which is a clear violation of European Convention on Human Rights. Is it fair? Although BP has provided aggregately $45m for the Regional Development Sustainability Program (RDSP), yet some environmental groups such as Friends of Earth, Amnesty International have blamed BP for gross human rights violations by torturing and abusing many local people who go against the project. Is it right? The news of human rights violations must be considered. The reports that BP uses illegal means against the landowners must be taken into account. Before going to make a decision about the project by the decision makers of this project, these concerns must be resolved. Is it sustainable or environmentally sound? Civil society groups have highlighted some grave environmental impacts of the BTC project. The coating of the pipeline, the risks of leakages, the disruption during the building phase, and more significantly Georgia’s water resources may be contaminated by the oil spills, are those environmental threats that could endanger the lives of local population. Despite BP has initiated RSDP program, yet the appropriate implementation of the RSDP looks less benefiting the local population as the Transparency International Corruption Perception Index ranks Azerbaijan and Turkey at 125 and 77 respectively. Part B) Safety, risk and environmental protection Recently, we have seen the horrible impacts of Gulf oil spill in the Gulf of Mexico at the hands of British Petroleum (BP). This single incident has put the entire sea life under the threat of extinction. Even if the BP is heavily charged or fined for it, in fact, it has been heavily charged; but, it would not undo the impacts of that oil spill. That heavy fine or charge cannot bring back the same environment to sea life that was there before the oil spill. Additionally, some authors on the issue point out the irresponsible role played by the BP over the handling of the problem of spill over. Now, it is useless to point out BP or any one; important thing is that to what extent the business community gives importance to business ethics? It is there where the crux of problem exists. In this regard, it is highly significant to understand what business ethics are; and how companies should implement them in order to protect the Mother Nature from any such events in the future? Business ethics have become more relevant nowadays than ever before. Business community faces different environmental, social, cultural, religious and other groups regarding the impacts of business on the above mentioned aspects of human life. As the global resources are fast diminishing, dangerously increasing carbon foot print, threatening global warming, polluting physical environment, endangering the lives of wildlife; all these factors have pushed humanity to think and act collectively rather than at the cost of one another. As a result, business ethics have been introduced to safeguards the interests of everyone who is being affected by the impacts of business. Without any doubt, the activities of business directly or indirectly threaten the lives of nearby communities. In the subsequent parts of this research paper, first, environmental reporting and its accounting aspects are described; subsequent to that, some aspects of environment are critically analysed from the given case study. Last, but not least, a conclusion is incorporated into the paper, describing some recommendations relating to the case study. Environmental Reporting Environmental reporting is a disclosure of information of the impacts of the business operations on the natural environment. This disclosure is published with by the companies in their annual reports. To report their effects on the natural environment, companies use either of the ways to publish environmental reporting-either with the published annual financial statements or a separate portion consisting report on environment. The International Accounting Standards Board (IASB) is an independent international accounting body that sets accounting standards. The IASB has issued many International Financial Reporting Standards (IFRSs), which guide companies to determine and implement their accounting policies, concepts and frameworks. However, in International Accounting Standard 1, the IASB has clearly highlighted that any report or statement outside financial statements is and will be considered outside the scope of the IFRSs. As a result, there are no mandatory IFRS requirements on issuing separate environmental reports. On the other hand, the UK’s Department for Environment, Food and Rural Affairs (DEFRA) stipulated in January 2006 that out of 250 UK based companies 140 had issued reports relating to their environmental performance. In addition, in order to increase the sense of responsibility towards environmental reporting, the DEFRA has also issued guidelines for environmental Key Performance Indicators (KPIs). Reasons for Environmental Reporting Many entities have started issuing environmental reports with their annual financial reports. Various reasons have pushed these entities to understand and realise a sense of social responsibility towards the natural environment. First, many stakeholders are constantly pushing and demanding from entities to develop and issue environment related reports; to obtain the social approval for their commercial activities, entities publish their environmental reporting. Additionally, to demonstrate compliance with regulations, to understand and display responsibility for the natural environment; many entities have no other way except to publish environmental reports. Historical Perspective History has witnessed grave environmental disasters. They had seriously damaged the natural environment. During the period of late 1980s and early 1990s, many environmental disasters, such as the Exxon Valdez Oil Spill in which approximately 10.9 million gallons spread across the Alaska coastline (eoearth), and the explosion of at the Bhopal Chemical factory in India, had raised many serious questions about the ethical role of business towards the natural environment. Furthermore, in the year of 1992, Rio Earth Summit did also highlight the significance of the natural environment and the role of the business community. More recently, the occurrence of oil spill in the Gulf of Mexico endangering the entire sea life and mishandling of the BP have left no point that business ethics must not change. Types of Environmental Reports Various types of environmental reports can be published by the large companies. Most of the companies do not publish these environmental reports with their annual financial statements rather they publish them separately as a part of their sustainability reporting, which is the process of doing business in a way to enable an entity to attain its corporate objectives without compromising the ability of future generations to meet their needs (Corporate Reporting, 2008/09). The following can be a part of a company’s environmental reporting: The consumption and use of energy Carbon foot print Pollution Management of waste Policy of recycling Intrusion into the landscape The impacts of a company’s commercial activities over the wildlife and sea life The benefits of the company’s products and services towards the wellness of the natural environment There are various accounting policies and accounting practices relating to the environmental reporting. These accounting policies vary from industry to industry. However, companies are no longer free to do business and spoil the natural environment; there are various environmental and social groups who are critically and closely monitoring the business activities and their impacts on the environment and on the local population. Critical Analysis of the Case Study Serious environmental threats endanger the life of local people and sea life in the given case study. Although the BTC project would be a huge source of revenue for Turkey, Georgia and Azerbaijan, yet the big revenue must not be at the cost of the local population. The members of civil society and other environmental groups have raised their serious concerns over the subsequent and possible serious impacts of the project. First, this project is going to dislocate up to 30,000 civilians throughout the construction period of the project. Despite the BP has initiated the Regional Sustainability Development Programme (RSDP), the level of corruption in these countries have minimised the chances of providing the required level of benefits to the local population. Second, the widespread corruption in Azerbaijan, Turkey, ranked at 125th and 77th by the Transparency International corruption Perception Index respectively have created other fears such as the management and handling the issues the risks of leakages, and the coating of the pipeline according to the international standards. Additionally, the civil unrest and conflict between different local groups have increased the chances of terrorist attacks on the pipelines. Furthermore, in the given case study, some campaigners such as Friends of the Earth, Amnesty International have severely criticized BP over its signing the contract of a Host Country Agreement (HGA) with the government of Turkey, as the Professor Sheldon Leader clearly calls it as a severe and blatant disregard to the European Convention on Human Rights. Furthermore, these environmental groups have also accused the BP of using every possible illegal means to achieve its corporate objectives, such as allegedly torturing the human rights activists and the critics of the BTC project. Additionally, the company in coordination with the local police has been persecuting the local population and local land owners into accepting inappropriate amount of compensation over their land or face severe consequences in case they refuse to do so. The use of threat and illegal means are those charges that the human rights activists level on the aggregate behaviour of the BP over the BTC project. Since BP does not care for the European Convention on Human Rights while signing the agreement with Turkey, which is totally illegal and severe breach of European Laws, then without any doubt, BP could go to any extent to achieve its notorious strategic objectives from the project at the cost of others. Undoubtedly, as the magnitude and net earnings from the BTC project is significantly huge not only for BP but also for the governments involved in the project, every illegal act either from the side of BP or from the side of involved governments would not be allowed to be heard by human rights activists and other members of the society; who really care for the goodness and wellness of the local people. Conclusion Environmental reporting represents the information relating to the impacts of business over the natural environment. Due to various recent damages to the natural environment at the hands of business community, many companies sense it as their responsibility to publish their environmental reports with the annual financial statements. Although the companies such as BP are regularly producing their sustainability reports, yet there are certain issues, such as the concerns related to the BTC project, which are yet to be properly handled by BP. BP must give a serious attention to the concerns raised by the environmental groups. There is no doubt that the BTC project would bring multiple advantages to many stakeholders involved in the project, generating revenues for the companies and governments, creating job opportunities for the local population. However, BP must ensure that it comply with the regulations relating to the coating of the pipelines, put a strong monitoring team over the possibility of leakages, which could seriously undermine the health of the natural environment. Furthermore, BP must not compromise over the concerns like corruption since this could in the subsequent effects contribute directly or indirectly environmental problems. Also, if BP wants to maintain its soft and positive image in the industry and in the international business community, it must try to resolve the issues of alleged torture, abuse and other illegal tactics which the environmental groups accuse of it. References 1. ACCA Text book-2007/2008 ,’Corporate Reporting’, Berkshire: Kaplan 2. DEFRA,’ Environmental Key Performance Indicators’, [Available at http://www.defra.gov.uk/environment/business/reporting/pdf/envkpi-guidelines.pdf ] [Accessed: 29 March, 2011]. 3. Campbell, D2008, ‘Work Ethics’, ACCA STUDENT ACCOUNTANT, Is,03/2008, pp.58-59, [Available at : http://www.accaglobal.com/pubs/students/publications/student_accountant/archive/sa_mar08_campbell.pdf ] [ Accessed: 29 March, 2011]. 4. Exxon Valdez oil spill, [available at: http://www.eoearth.org/article/Exxon_Valdez_oil_spill?topic=58075] [ Accessed 29 March, 2011]. Read More