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Páll M. Rikhardsson, Price Waterhouse and the Aarhus School of Business, Aarhus, Denmark

(Business Strategy and Environment, Vol. 5, 262-272, 1996 c: John Wiley & Sons)


Developments in environmental reporting in Denmark in the 1990s are described and also some interesting legal developments regarding the new Danish law requiring approximately 2000 companies to produce environmental reports. Some tentative speculations are offered about future directions for environmental reporting in Denmark and elsewhere.



Environmental reporting as a practice or even as an academic research interest was almost unknown phenomenon in Denmark until the beginning of the 1990s. Although Danish industry often considers itself in the forefront of environmental management there was apparently no motivation to report environmental information to company stakeholders. There are no surveys of environmental disclosures before 1991 and we may assume, based on later survey results, that there were no major initiatives in this field before that time.

During 1992 the Danish Steel Works published green accounts as a separate part of their annual financial report, which included a mass balance and a description of the company' s environmental relations and impacts. This report marks the birth of environmental reporting in Denmark In a survey of 92 Danish annual reports by Deloitte Touche in 1992 and 1993 (Deloitte Touche, 1995), approximately half included environmental information, mostly concerning environmental legislation and product development. In 75% the environmental information occupied less than five lines of text. Rikhardsson (1994) analyzed 156 Danish annual reports from 1993 and reported similar findings to Deloitte Touche. Although 42 corporations included environmental information in their annual reports, this was on a very' general level, took up a small amount of space and concerned a limited number of issues, Rikhardsson also attempted to measure the quality of the information disclosed. The main conclusion was that the information is generally disclosed in qualitative and non-verifiable terms. In a questionnaire survey of 180 companies by Price Waterhouse in 1993, 7% said that they included environmental information in annual reports, although no specification was offered. KPMG surveyed SO Danish annual reports and found that 17 included environmental information. A general conclusion about Danish environmental reporting during this period is that although some companies included environmental information in their annual reports these disclosures were limited and general in nature.

During 1994 the first separate environmental report was published. The medicinal firm Novo Nordisk launched its environmental communication initiative with the publication of a 36 page report focusing on its products, product life cycles and company environmental performance indices. Later during 1994 and in 1995 other companies published separate environmental reports or devoted separate sections of their annual report to environmental information. A total of 12 Danish environmental reports or environmental sections in annual reports competed for the annual Green Information prize given by the Danish Institute of State-Authorized Accountants and the business newspaper Borsen in October 1995. These included reports and annual report sections from a transportation company, an electric utility , a resource extraction company, a textile company and , a municipal authority.



Denmark is the first Member State in the EU and, arguably, the first country in the world to introduce a law that requires certain Danish companies to publish annual environmental reports. The law was passed in June 1995 (Danish Environmental Ministry, 1995a) and took effect in January 1996 along with a specifying regulation (Danish Environmental Ministry, 1995b), Until then there had been no specific requirement to publish environmental information except when accounting laws and standards required this in relation to liabilities and the valuation of assets (Price Waterhouse, I995). The accompany regulation sets out which type of company has to publish an environmental report. These are a subset of those companies that are registered under paragraph 5 of the Danish Environmental Protection Law identifying specific industries as exerting significant environmental impacts based on their type of production and size. In total, there are approximately 7,000 companies registered as having significant environmental impacts and of these approximately 2 000 are required to publish an environmental report. Regarding the content of the obligatory annual environmental report, the regulation specifies three sections: (i) general information such as company name, location and industry; (ii) qualitative description of corporate environmental performance; and (iii) quantitative information regarding the use of polluting substances in production processes, products and wastes as well as emissions to air, water and soil. The environmental reporting year should be the same as the financial reporting year where possible and the environmental report is to be sent to the same public authorities as the financial annual report. The reports will be available to the public in the same manner as financial environmental reports.

One feature of the law is a paragraph stating that, at a future date, the authorities can introduce a mandatory third-party auditing of the reports. So far, in statements issued by the authorities, there are no plans to use this aspect in the near future. Another feature of the law is that companies committing themselves to implement an environmental management system can postpone their 1st report for three years. A third feature is that the authorities can reject an environmental report should it not meet the requirements of the law. More specific criteria have not been published by the authorities, Finally, the public has the opportunity to object to specific environmental reports and have them evaluated by the authorities to determine whether these give a reliable picture of a company' s environmental performance. Again, specific details for processing such protests have not been published.



In the short span of five years the Danish environmental reporting situation has moved from almost no disclosures to obligatory reporting for specific companies. The future will therefore most definitely see more environmental reports and more environmental information, There are, however, some aspects to be considered regarding what general reporting practice will emerge. At least two different scenarios can be identified.

(i) The environmental report will be produced with a minimum of work plotting figures from government pollution permissions into the reports with little extra information, i.e. , going through the motions' reports.

(ii) The environmental report will be integrated into the corporate communication strategy as a way of showing what the company has achieved in the environmental area and as a way of legitimizing corporate existence to society.

Reporting practices will probably lie between the these two extremes. Some companies will ignore spirit of the law by publishing short, general and unusable reports. Others will actively use the report and the process behind it as a part of their environmental strategy. Which group becomes the larger depends on several factors. Firstly , the development of general practice will depend on how the Danish Government chooses to enforce the reporting style and content and how the rejection clause available in the law will be used. As in the development of generally accepted practice in the field of financial accounting, much depends on government polices, court decisions and the diffusion of knowledge and techniques within the community of practitioners. There are a number of questions which we can envisage being answered by this process, such as: what are acceptable ways of 'hiding' competitive information by reporting indices instead of absolute figures; under what circumstances will an environmental report be rejected by the authorities; and how will an environmental report be evaluated if there is a public objection?

The second factor influencing the development of general practice is the use to which these reports will be put. Although many stakeholders have been mentioned as potential users in past arguments for environmental reporting, there has never been a potential comprehensive environmental information source such as that which will become the norm in Denmark within the next few years. How stakeholders will receive the reports is uncertain. For example, some studies indicate that at investment analysts do not use the few environmental reports available in their decision-making (Cleaver, 1994), although this might be seen as a ‘chicken and egg' situation, i.e. which comes first, the need for information or the information itself? Do investment analysts not use the reports because the information reported in these is irrelevant, or is the real reason that the investment analysts do not have access to valid and benchmarked information such as might become available with obligatory environmental reports?

Regarding other users of environmental information, although some studies document that environmental information is seen as important by the financial community, local communities, public accountants, journalists, etc. (VKI, 1995), relatively, little is known about the actual uses to which this information is put. The development of accepted practice will therefore greatly depend on what companies feel they get out of the environmental reporting exercise and the feedback and response they get from the recipients of the reports. One possible response could be that environmental organizations such as Greenpeace or Friends of the Earth will play a sort of 'watchdog' part in monitoring environmental reports and objecting to misleading disclosures or missing information.

A third factor influencing general practice is the question of third-party verification. If this becomes a reality, a new breed of auditors has to emerge. In collaboration with technical and natural scientists we can envisage that the auditing of environmental reports will become a logical part of the services offered by accounting firms. However, a third-party verification will require the development of methods and techniques for use in the verification process. Furthermore, the reliability of the information presented in the environmental report would depend on the content of the verification statement itself. Currently, there are three types of environmental verification statements found in the few environmental reports that have been verified. The first says something to the effect of 'We have seen two columns of numbers and these add up'. The second says 'We have seen the columns of numbers and have tested that the systems producing these numbers are valid' . The third says 'We have checked the validity of the numbers, the validity of the systems and made certain that the numbers s are a reliable description of reality' . How the verification statement is worded will inevitably influence the use and disclosure of environmental information in environmental reports.

Apart from the potential development of general environmental reporting practice there is also another plausible effect of this new legislation. By and large we might say that the actual environmental reports of the companies are not the most important result of the law. It is a sad fact that only a minority of (often cited) companies are genuinely (pro)active in managing their environmental relations. Most companies manage environmental issues as they v appear in the form of new legislation, new costs, changed competitive requirements, etc. This is especially true for many small and medium sized enterprises, What might be a more important effect of the law, in the long term, is that approximately 2000 Danish companies may be motivated to embrace environmental matters and implement some sort of environmental management system and environmental registration system. By introducing the environment as a variable to be included on a level with other business variables, it makes it possible to harness one of the most scarce resource in companies today. management attention. Perhaps the process will become more important than the product and the means more important than the ends.



In a relatively short period of time Denmark has gone from relatively little environmental reporting to obligatory environmentally reporting for many companies. There are few general experiences or tradition for publishing environmental reports to date. We can tentatively .conclude that the future will certainly see more environmental information being published from a greater number of companies. More companies will be aiming to implement environmental management systems. What is uncertain, however, is the quality and usability of the information reported. Furthermore, it is uncertain how potential users will react to this new information source and if they will include it in their decision-making. This will become clearer over the next five years.



Thanks to Richard Welford, C. William Young, Michael Brophy and Richard Starkey for comments on an earlier draft of this paper. All mistakes are the author's responsibility.



Cleaver, A, (1994) The analysts perception: results of a BiE/Extel survey. 1n: Environmental reporting: What the City Should Ask; Transcripts of a Seminar Held at the NatWest Hall, London, 16 November 1994, Department of the Environment, London.

Deloitte Touche (1995) (Environmental Reporting in Annual reporting), Deloitte Touche Tohmatsu international Copenhagen, Danish Environmental Ministry l995 Green Reporting Danish Environmental Ministry ()

(l995b) Bekendtgorelse om uisse godkendelsespligtige oirksomheders pligt til udar~delse af gront regnskab, Green Reporting and Regulating.

KPMG (1993) KPMG International Survey of Environmental Reporting, KPMG Peat Marwick. Thorne.

Price Waterhouse (1993) Environmental Situation in Danish Companies,. Prince Waterhouse, Copenhagen.

Price Waterhouse (1995) The Annual Environmental Reporting: Measuring and reporting Environmental Performance, Price Waterhouse, Copenhagen.

Rikihardsson, P.M. (1994) The Measurement and Reporting of Corporate Environmental lnformation. Paper prepared for the Nordic Network Conference Business and the Environment, Sandvika, 7-2 December 1994, Norway,

VKI (Vandkva1itetsinstituttet) (1995) (Publication of Environmental Statements under the EMAS), Copenhagen.



Páll M. Rikhardsson is employed by Price Waterhouse Denmark He is working on a three year project studying corporate environmental performance measurement. The project is a collaboration between Price Waterhouse and the Aarhus School of Business. His contact addresses are:

The Aarhus School of Business, Department of Organization and Management, Haslegaardsvej 10, 8210 Aarhus V, Denmark, Tel:, (+45) 86486688, fax (+45) 86 157629 and Price Waterhouse, Tuborg Boulevard 1, 2900 Hellemp, Denmark, tel. (+45) 39 37 00 00, fax (+45) 39 47 00 10.