Environmental impact identified from company accounts in the Czech Republic

Abstract

The contribution aims to examine the readiness of enterprises' accounting systems in the Czech Republic to display environmental activities. The need to monitor the environmental profile of a company requires, inter alia, the need for modifications of existing accounting systems of enterprises by the addition of an environmental factor to the standard economic information provided so as to capture the interaction between the activities of individual companies and the environment. Financial accounting of Czech companies is ruled by legislation. There is no requirement for the separate evidence of the environmental impact. Some of the environmental information is included in the annual reports of large companies only. In the context of the requirements of sustainable development, however, it would be desirable that all companies follow the information generated by the system of environmental accounting. Managers can continue to work with the data provided by this system and, they can evaluate the feedback to influence company behaviour. Precisely quantified actual costs (or revenues) associated with the environment allow a specific company to define its environmental profile, or to reveal its strengths and weaknesses in this area and positively influence its relationship to the environment with the help of partial analysis such as tracking the current trend in time, to compare its own environmental profile to the competition, to differentiate effective products not only in economic but also in environmental terms. Then, this generated information is externally useful to investors, banks and other stakeholders. Last but not least, in the context of a defined risk of environmental pollution level, enterprise value and its market position can also be affected.

Accounting agenda and evaluation of enterprises’ environmental activities in the czech republic

“…Environmental information is usually not directly included in the structure of financial statements (i.e. balance sheet and income statement) [9].…”

“…Managers of the company have a difficulty to identify them and thus, there is no feedback that would motivate responsible staff to manage and optimize these costs. The problem may also lie in an inaccurate allocation of environmental costs, which leads to wrong decisions of the management in promoting more environmentally friendly products (owing to a base of overheads distribution, environmental costs are incorrectly allocated on products that are not associated with damaging the environment) [7]. Some environmental costs are also not shown sufficiently, although they are significant (e.g.…”