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How long before the environmental P&L?

I had an invigorating discussion in London yesterday with a renowned UK management consultant who among being active in a number of other emerging fields, is working with very large organisations on a quest to construct highly accurate models for the measurement and control of carbon cost and other environmental impacts. There is apparently a growing level of interest from the investment community to obtain a framework to enable fund managers to accurately benchmark and then choose future investments based upon environmental performance as well as economic.

Green IT – not a label I’m a fan of, personally -  is an area I have been following for the last two or three years. Indeed it has been lately discussed and debated at some length at the Institute’s IT Faculty’s monthly technical committee meetings (upon which I sit) – in fact it would be remiss of me not to promote the ICAEW’s IT Faculty conference on Green IT in London next week.

But my sense is that for small businesses, the emergence and establishment of comprehensive environmental accounting will come in two phases; first though individual choice and then later through commercial imperative, whether direct or indirect.

In the immediate term it is likely that the primary motivation for small business owners to get green, whether through the use of smart technologies to mitigate or negate transportation costs for example, or through the careful selection of green suppliers, will be primarily driven by a personal sense of social responsibility and choice.

But in the medium to longer terms I see a strong parallel with the top-down adoption of quality management standards we saw emerge though the late eighties and early nineties. Whether it was through adherence to the British Standards Institute’s BS5750 quality standard or ISO9000, eventually even the smallest businesses at the foot of the supply chain were commercially encouraged, usually by an indirect customer once or twice removed near the top of the chain, to adopt or comply with formalised quality management processes.

So, while early adoption of quality management was mandated as a condition of trade, eventually it became a de facto norm as small businesses came to appreciate the wider commercial benefits it offered them, even if the effort to comply impacted short term profitability.

And so I suspect the same will be true for many businesses when it comes to environmental accountability. Or is it more complex that that?

 

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