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Environmental Accounting and CSR: CPAs and CSR

Assurance Services on CSR Reports

Though there are no legal regulations related to the disclosure of corporate CSR information in Japan, corporations have been providing information voluntarily by way of their CSR reports etc. There are some CSR reports that include assurance reports; most of the reports are provided by CPAs in Japan.

The Ministry of Environment(MOE) established the "Law Concerning the Promotion of Business Activities with Environmental Consideration by Specified Corporations , etc, by Facilitating Access to Environmental Information, and Other Measures" in 2004. According to the Law, there are some requirements as follows:

  • Specified Corporarions must publish an environmental report every year in accordance with the Ministerial ordinance.
  • Specified Corporations must enhance the reliability of the report by examination themselves or another entity.
    Related to these requirements, the MOE established "Assurance standard on the Environmental Report (Draft)". This is an assurance standard of the report.
    In the establishment of the standard, many Japanese CPAs worked to advise about it and to provide their knowledge and experience.

Advisory Services Relating to CSR Reports

JICPA member provide the CSR advisory services based on our knowledge, skill and experience obtaining through the financial audit and the relating business. Our main services are to support the building CSR management system and the CSR reporting.
In the CSR management system service, we make the benchmark comparison and investigate and analyze strong and week points, and grasp and analyze the expectation and the anxiety of the specified stake-holders. Moreover, an encouragement of the stake-holder engagement (dialogue), the setting of key performance indicators, and advice concerning management are also offered.
In the CSR reporting service, we advise on the process to identify the material issues which the CSR report should contain, and the data-gathering method.
Besides this, we may provide the specific services in the compliance, the information security, and the business continuance management field.

Specified Corporations

a business entity that is established under a specific law and that is governed by the ordinance, which include the following considerations: the magnitude of national giant or subsidies provided to cover necessary expenses for business management; the relationship of the corporation to relevant administrative work or projects of the State; the form of the entity, including whether it is a cooperative entity; the severity of the environmental load produced by the business activities; the size of the organization; and other situations.

Verification of Greenhouse-Gas Emissions

Since the Kyoto Protocol came into effect in 2005, moves by the signatory countries to cut greenhouse-gas emissions have been accelerating. Although at the time of writing (2007) companies in Japan are not obliged to curb their emissions, many of them, particularly large ones, are stepping up voluntary efforts to do so in an attempt to fulfill their corporate social responsibilities.
Japan?s Ministry of the Environment, as part of a project to cut greenhouse-gas emissions, is inviting companies to apply to be assigned voluntary reduction targets and have measured and verified the greenhouse-gas emissions reductions they have achieved through the introduction of energy-saving equipment. The companies can then buy or sell, on an experimental basis, emissions allowances according to whether they have exceeded or fallen short of their targets. The baseline for greenhouse-gas emissions is the average of annual greenhouse-gas emissions during previous years, and is verified by a certification body. Annual greenhouse-gas emissions since the introduction of the energy-saving equipment are then verified and subtracted from the baseline emissions to calculate and authenticate the reduction achieved.
Accounting and auditing techniques are useful for verifying companies greenhouse-gas emissions and reductions in this way, and at present the reviews are carried out by organizations such as audit corporation subsidiaries and ISO certification bodies

Greenhouse-Gas-Related Advisory Services

In Japan, emissions of CO2 account for more than 90% of total greenhouse-gas emissions (in CO2 equivalent terms). Nearly all this CO2 comes from burning fossil fuels, and energy use by companies is based almost entirely on fossil fuels, in the form of electricity, city gas, and fuel. Companies obviously have to pay for this energy (electricity, city gas, and fuel), which means that using it efficiently reduces total energy usage, costs, and emissions of greenhouse gases.
Because it reduces costs, companies all take investment in energy-saving measures seriously, and try to find investments that pay for themselves within as few years as possible. We CPAs offer various greenhouse-gas-related advisory services in this regard. For example, because we are generally independent of specific equipment manufacturers, we can make highly objective recommendations for effective investments that will benefit the company concerned, rather than the producer of the equipment. The ability to give advice on methods of calculating greenhouse-gas emissions and reductions is another of our strengths.

Environmental-Accounting-Related Advisory Services

We can collect and analyze environmental cost and performance data to make business decisions that are optimal from both an environmental and economic perspective, and provide support with building, and advice on analyzing, the environmental accounting systems that enable the outcomes of these decisions to be reported. As well as ensuring that disclosures are in line with the Ministry of the Environment's environmental accounting guidelines, we can deliver customized environmental accounting solutions to companies deploying such systems.
We can also provide environmental accounting (environmental management accounting) solutions that are useful for making internal decisions concerning specific objectives. For example, we can offer advice on the deployment of material cost accounting (a tool that enables environmental impact to be lessened and costs to be trimmed simultaneously) environmentally-friendly decision-making accounting, and lifecycle costing.
By exploiting our unique ability as CPAs to align environmental-accounting initiatives with financial accounting, we can help companies deploy environmental accounting solutions that enable circumstances at their companies to be accurately reported to the outside world and environment-focused internal management systems to be established.

Environmental Management Systems

More companies have had their environmental management systems certified under the ISO 14001 international standard in Japan than in any other country in the world. An environmental management system (EMS) is a management system that employs the PDCA (plan, do, check, act) cycle to mitigate environmental impact.
The construction of an EMS requires companies to understand the requirements of the ISO 14001 standard; conduct environmental impact assessments to identify practices that have a significant environmental impact; survey environment-related laws and regulations; establish environmental policies, objectives, and targets; put together an environmental program; produce a series of documents and combine them into an environmental management manual; and produce a secondary document containing rules. Actual implementation requires the establishment of an environmental management structure, the execution of the environmental program to meet targets, progress management, internal environmental audits, and reviews by management.
EMS construction and implementation is an area in expertise for CPAs, who possess experience in evaluating and advising on the construction and operation of internal-control systems.


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