Environmental Disclosures of Burberry Group Plc and Hennes & Mauritz AB - Essay Example

? INTERNATIONAL ACCOUNTING Table of Contents Table of Contents 2 Introduction 3 Comparison of environmental disclosures in the annual reports 3 Materials 4 Energy 4 Water 5 Biodiversity 6 Compliance 7 Emissions, Effluent and Wastes 7 Conclusion 8 References 9 Introduction This study entails about the comparative analysis of the environmental disclosures presented by the two companies namely Burberry Group Plc. and Hennes & Mauritz AB (H&M) in their latest annual reports concerning the year 2011. The environmental disclosures have been compared with G3 sustainability guidelines of the Global Reporting Initiative (GRI) taking into account different environmental performance indicators related to various disclosure requirements as recommended by GRI. Burberry Group Plc. is a multinational company which operates its business in the apparel sector of the textile industry. It is headquartered at London, United Kingdom and was founded in the year 1856 (Yahoo Finance, 2012a). Hennes & Mauritz AB is headquartered at Stockholm, Sweden and was founded in the year 1947. It is also engaged in the business of running retail stores in Sweden and abroad and offers different types of products which mainly includes apparels, footwear, cosmetics, etc. (Yahoo Finance, 2012b). Comparison of environmental disclosures in the annual reports Annual reports of a company are meant for the shareholders and different other stakeholders to help them in their decision making process. According to GRI, every public company is required to present their sustainability report referring to various environmental disclosures in their annual reports. Sustainability reports serve for the purpose of making the public organizations follow practices which would ensure their accountability and responsibilities towards their stakeholders. According to G3 sustainability report guidelines the performance indicators are broadly classified into three categories namely, Environmental, Economic and Social (GRI, n. d.). Six different aspects of the environmental disclosures as mentioned in the G3 sustainability report related to Burberry and H&M has been discussed in details as given below: Materials There are two environmental performance indicators mentioned in the G3 sustainability report that are related to the materials aspect. One such indicator is the materials used by a company in percentage terms that are recycled as input materials. This type of indicator has been devised to measure the ability of the organization to utilize its recycled input materials. If we look at the 2011 annual report of Burberry it can be observed that it has indicated its total recycled raw materials waste which has been recycled in 2011. However it is indicated in absolute terms as 148 tons of raw materials waste recycled in 2011 (Burberry, 2012). Next the 2011 annual report of H&M indicates that no such indicators have been mentioned. It only talks about the company’s commitment towards reducing wastes that are used in its various production processes. However no such absolute figures or percentage terms related to the amount of recycled waste materials utilized by the company has been disclosed in its annual report (H&M, 2012). Hence, it can be concluded that Burberry complied with the disclosure requirements related to the materials aspect of environmental disclosures but H&M did not comply with the same. Energy There are five environmental performance indicators mentioned in the G3 sustainability report that are related to the energy aspect. One such indicator is the initiatives taken up by an organization to result in increasing use of renewable sources of energy in an efficient manner to help in the reduction of the overall energy requirements of the company. In accordance with this disclosure requirement the companies are required to report on their existing initiatives that helped for the cause of reducing the energy requirements of the major products produced by them. The 2011 annual report of Burberry indicates that the company has mentioned about some of its major initiatives that have resulted in the energy requirements in some of its major products. Some of those disclosed initiatives taken up by the company in 2011 include 30% reduction in energy requirements that was previously utilized in the production of trench coat at the Castleford facility located in Yorkshire. The company has also mentioned about its initiative to increase the purchase of renewable electricity for carrying out its business activities in all over UK and 20% in America (Burberry, 2012). The 2011 annual report of H&M indicates about various initiatives that are about to be taken to reduce its energy consumption. It is committed towards reducing its electricity consumption levels in the stores by around 20% by the end of 2020. It has also set the objective of reducing its carbon dioxide emission by around 5% each year with respect to sales (H&M, 2012). Hence it is observable that both the companies have complied with this disclosure requirement and are mentioned in their annual reports for the year 2011. Water There are three performance indicators relative to the aspect of water mentioned in the disclosure requirements present in the sustainability report guidelines. One such performance indicator related to the aspect of water is the volume of water that has been recycled and re-utilized by an organization. This indicator helps in measuring the efficiency of an organization regarding the extent up to which it is able to conserve water (Burberry, 2012). In case of Burberry, no such significant disclosure related to this performance indicator has been mentioned in its annual report for the year 2011. However, in case H&M its annual report for the year 2011 indicates about its initiatives that have resulted in water conservation. One such initiative is a water conservation project run by the company at Bangladesh that has resulted in saving around 300 million of water in 2011 (H&M, 2012). Hence it can be concluded from the above facts that Burberry has not complied with the disclosure requirements relative to the aspect of water as mentioned in the sustainability report guidelines. However, H&M has made concerned efforts to disclose relevant facts regarding water conservation in its annual report. Biodiversity There are five performance indicators relative to the aspect of biodiversity as mentioned in the sustainability report guidelines. One such indicator is descriptions of various business activities carried on by the concerned organization which has a significant impact on improving biodiversity. This indicator measures the various business activities carried on by the organization which has an impact on biodiversity. If we look at the annual report of Burberry for the year 2011 it can be observed that it has take several initiatives to impart biodiversity and preserve it as well. The company was involved in participating in a tannery assessment project at Italy which indicates its increased concerns related to environmental management. It has also undergone several supply chain activities which has resulted in its decreased impact on environment, thereby promoting biodiversity (Burberry, 2012). The annual report of H&M for the year 2011 indicates various facts regarding its various initiatives to promote biodiversity. The company has set 2020 as the target year by when it will use cotton required in its production process sourced from sustainable avenues. It is also committed towards the use of recycled cotton in its business processes as well (H&M, 2012). All the above facts suggest that both the companies have not specifically complied with the disclosure requirements related to the aspect biodiversity but have mentioned various activities taken up by the companies to promote biodiversity. Compliance There is one performance indicator related to the aspect of compliance as mentioned in the sustainability report guidelines. The indicator is related to the monitory value of different types of fines or penalties incurred by the company in relation to its non-compliance of any of the existing environmental regulations. This indicator helps in measuring the efficiency of the company management to carry on their operational activities in conformity with certain kinds of performance indicators. The annual reports of both the companies does not indicate any kinds of such disclosures regarding fines imposed on them for non-compliance of environmental regulations. This fact indicates that both the companies may not have incurred any type of such fines in the year 2011. However it has not disclosed any facts related to such event of absence of non-compliance in their annual reports. Emissions, Effluent and Wastes There are ten performance indicators relative to the aspect of effluents, emissions and wastes mentioned in the sustainability reporting guidelines. One such indicator is the emissions in the form of greenhouse gases that have resulted from the business operations carried out by the concerned organization. The annual report of Burberry for the year 2011 indicates that it has got itself associated with the Carbon Disclosure Project. However no such specific disclosures related to the amount of greenhouse emissions made by the company through its business activities have been disclosed in its annual report (Burberry, 2012). H&M on the other hand, has mentioned in its annual report about the initiative taken up to reduce carbon dioxide emissions occurring through its operational activities. However, no such specific disclosures related to the amount of greenhouse emissions made by the company have been indicated in its annual report (H&M, 2012). The above facts suggest that both the companies did not comply with the environmental disclosure requirements related to this particular aspect of effluents, emissions, and wastes. Conclusion Sustainability reporting is a means of disclosures to be made by the organizations so as to make them accountable to their stakeholders, be it internal or external. Environmental disclosure is one of the three aspects which are required to be followed by all the organizations. GRI has set out guidelines for environmental disclosures which are to be followed by all public organizations. The present study suggests that both the companies Burberry and H&M were committed towards sustainable development which is evident from the facts disclosed in their annual reports for the year 2011. However the six aspects of environmental disclosure requirements which have been studied here suggest that both the companies did not comply with all the specific disclosure requirements. Moreover the two companies being located in different countries are governed by different regulatory norms to be followed by them. Hence this can be a reason behind the differences in environmental disclosures presented by the two companies in their annual reports. Apart from this the divergence in accounting standards followed in different countries might also be the reason behind such differences observed between the two companies studied in this paper. References Burberry, 2012. Annual Report 2011/12. [pdf] Available at: [Accessed 4 October 2012] GRI, no date. Sustainability Reporting Guidelines. [pdf] Available at: . [Accessed 4 October 2012]. H&M., 2012. H & M Annual Report Part 1: H & M in Words and Pictures 2011. [pdf] Available at: . [Accessed 4 October 2012]. Yahoo Finance, 2012a. Burberry Group plc (BRBY.L) [online] Available at: . [Accessed 4 October 2012]. Yahoo Finance, 2012b. H & M Hennes & Mauritz AB (publ) (HMSB.DE): Profile. Retrieved from . [Accessed 4 October 2012]. Read More