ENVIRONMENT-JAPAN: Going Green is Good for the Bottom Line

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Jun 4 1999 (IPS) - Green groups have long tried to tell them the same thing, but it is only now that Japanese companies are starting to be convinced that looking after the environment does help their bottom line.

At least that’s what one of the country’s biggest firms is finding out after doing some “environmental accounting,” or calculating just how much economic gain it made due to a variety of environmental protection efforts it had made.

The giant electronics company Fujitsu Ltd recently released Japan’s first official ‘green bean counting’ report. It says it had a net gain of as much as four billion yen (33 million dollars) in economic benefits in 1998 alone, as a result of “environmentally friendly expenditures”.

The company also notes that such gains have been on the rise since 1996.

Consumer electronics industry leader Sony Corp. seems to be next in line in issuing a similar report.

It announced recently that it has already taken firm steps in setting up guidelines to calculate whatever it is spending to protect the environment, and what it has gained as a result of such efforts, if any.

No one could be more pleased with these moves than activists, who describe the decision of corporate heavyweights to take the lead in green accounting as “a major breakthrough” in the battle for a cleaner environment.

“The fact that big companies have begun this process matters a lot to the environment movement because it confirms the economic benefits of protecting the environment,” says Professor Koriyu Furusawa, who teaches environmental social science at Kokugakuin University.

Still, he says that to get the best results, it may be necessary to set up an environmental accounting institution that can give an independent evaluation on the benefits presented by the companies.

Indeed, it was only this March that the Environment Agency introduced guidelines for environmental accounting that has direct and indirect spending sectors. It has also proposed ways of differentiating ordinary investments for raising productivity, from investments aimed at protecting the environment.

Activists say having the companies issue environmental accounting reports not only makes businesses more conscious of their activities’ impact on the environment, but also demonstrates to the public the effects of “green-mindedness”.

In its report, Fujitsu itself said: “Our goal in the introduction of the environmental accounting system is to disseminate information to interested parties, and demonstrate our commitment to carry out effective environmental measures on a long- term basis.”

The company followed the guidelines developed by the Environmental Agency in doing its environmental accounting.

It arrived at the 1998 net gain figure of four billion yen after calculating that it had spent 14 billion yen (some 114.5 million dollars) in seven categories of environmentally friendly expenditures, and getting some 18 billion yen (147.5 million dollars) in benefits.

Most of this 18 billion yen represents the estimated total compensation that Fujitsu says it did not have to pay residents of areas surrounding its plants, because it implemented green measures in its factories to reduce harmful impact.

For 1997, the company says it spent some 7.9 billion yen (almost 65 million dollars) for environmental protection and gained 8.3 billion yen (about 66 million dollars) as a result.

It predicts that for the fiscal year 1999, which ends in March, economic benefits will be around 11 billion yen (90 million dollar), compared to the eight billion yen (65 million dollars) earmarked for environmental spending.

Fujitsu took into consideration the activities of its 1,338 affiliates in making its calculations. It describes benefits as contributions to environmental protection activities in support of production, energy conservation resulting from reduced use of electricity, oil and gas, as well as decreased paper use.

Other benefits include those resulting from recycling activities, such as the sale of used products and reuse of material.

For costs, Fujitsu has several sections such as direct and indirect spending, energy conservation and recycling expenditures. Under “costs for research and development”, the company put down the development of environmentally friendly products and green technology.

In the “others” section, it lists dealing with environmental risks like restoration of polluted soil and anti-dioxin measures.

Despite the new government guidelines, though, officials of some companies say there is still no comprehensible standard of environmental accounting.

This is apparently why Sony is trying to fashion its own system.

Hiroyuki Tada of Sony’s social environmental department says the company’s environmental expenditures will be divided into areas like investment in pollution control, expenditure to cut energy consumption and the cost of introducing and maintaining environmental management systems such as the ISO 14001 certification.

To evaluate its environmental efforts, Sony intends to use energy savings figures instead of monetary amounts.

But business analysts like Mariko Kawaguchi of the Daiwa Institute of Research say the present lack of standards in green accounting is no major worry. After all, Kawaguchi points out: “As the numbers increase, there will develop a more standard system for assessing environmental spending.”