their profitability.

The major costsand benefits profit br avoiding or rgnoring

earn fllore
in this regardmay be rs iollon s: management exPensesln
O, qr.rality product & low'er produ6l environmental
is sureto suff"r r hlow in
Environmental Management costs: :j:::.' ,tr. rttu., term,
w h e n r h e p r o c e s s. o s t a n d
(l) Capital expenditure on rhe acquisition (8) Sater producr and less q,arranry and repair ,t,. long run
p r o d u c t cost.wlll go uP clue to Bastage
of various measuring and controlling cosrafier sale. 'rnd
oth.r relatedpenal and compliance
equlPmenr. (9) Higher producr resaleand scrap Value. costs towards cleaning and restoring
(2) Depreciation ro be charged on such (10) Enhanced image of the product leading to environmental conditions Funher,
equlPmenr.
higher sale and increasedprofitability. several surveys indicate that 1'outh of
(3) Running and maintenance costs of such today are socially and environmentally
(11) Improved safety performance and reduced firmlY for
equlPment. conscious and stand
risk exposure. environmentally resPonsible corPorate
(4) Training and development costs of operarors D r a c l i c e s .A c o m p a n y b e h a v i n g i n a n
(12) Reduced labour turnover and a higher
ano emPloyees. environmentally-unfriendl,v manner
commitment of labour toward production
(5) Vaste handling and rrearmenr cosrs. and productivity. is almost sure to loose in a big way in
rerms of their customers, goodwill and
(6) Cost of legal support ( l l ) L o w e r i n s u r a n c ep r e m i u m . -
and compiiance brand image. So development can be ----\----:--
management.
(14) Better share price and reduced cost of capital sustainedon a long-term basis only with
(7) Insurance and lending costs. to berter lccess of credit and equiry. environmental friendly policies and

promotionandadvenise-(15) Better brand image. Practices.

,t,
*?T:..,",11,ion, (16) Improved public relation
So the key issue is, how to earn more
Economic prosperity and environmental management are the two
through better
profit and achieve more growth by going major link in the value chain a company needs to ps.sue. Th€ cost
(9) Remediation- contingentliability costs. compiiance and management.
along with environment, and how can asrGiated with environmental management wall not reduce proflt
but increase it many fcld in the long run.This is the new theory of
(10)Other costs,if any. (17) Tax incentives and concessions. internal performance drivers contribute
Environmental Management Benefits: ( 1 8 )I m p r o v e m e n t i n h e a l t h a n d q u a l i t y o f l i f e o f to the development of environmental
srrategies? This can be achieved in
the workers and community.
Therewill beseveralbenefitsfor an organisation, several ways. For example, a company wasteand effluents,recyclewaste for re-useand
which properly addressesits enviionmental Sustainable Development and may develop nev/ products and new process, development of by-products and thus reduce
managemenrissuesand plays a proactive role in Environmental Management which are more environmental friendly. It can costof operation,increaserevenueand enhance
this regard.Somemajor benefiti may be, control pollurion, conserveenergy, minimise profit and profitability. In the short term,
Vorld Commission on Environmental
(1) Reduction in material usase due ro Development (1987) has defined susrainable environmental managementexpensesare always
completeprocessing,substitutiJn, reuseand development as "development rhat meers more than the benefitsbut in the iong term the
Environmentalmanagementand
recycling. the needs of the present generationwithout economic development are not benefits far outweigh the expensesincurred.
compromising the ability of future generations conflicting to each othel; rather Thus, in the iong run, there cannot be any
(2) Yield improvement of process.
to meet their own needs" they are complementaryto each conflict between environmental management
(3) Better utilisation of materials thoroueh and profitability of a firm.
It comprises three distinct but inter-relared other and should be managed
development of bye products and joi"nt in an integrated manner.Any
issues. Economic development through long Strategic Environmental Management
Prooucts. term profitability, maintaininBecologicalsysrem organisation trying to earn more System
(4) Reduceidle anddowntime through proactive by addressing appropriately and adequately profit by avoiding or ignoring
environmentalmanagement Having firm belief on the long term benefitsol
repairsand maintenance. environmentalmanagementissuesandsupporting
expensesin the short term, is environmentmanagementexpenses, companies
(5) Improved energyefficiencyandlower energy ethics and social justice in performance and must adopt environment friendly polices ani
sure to suffer a blow in the long
consumption due to energy conservation decisionmaking. Soenvironmenralmanagement run when the processcost and formulate actionplan to implement them. This i:
policy put in place. and economic development are not conflicting strategicenvironmental managemenl
product cost will go uP due to in essence,
to each other, rather they are comptementary - the integration of environment managemenl
(6) Conversion of wastes into valuable forms to wastage and other related Penal
each other and should be managed in an with the goalsof the firm through strategies
thus reducing handling and treatment of integrated 'oritrying and compliancecosts.
manner. Cn1, o.rrn'r" to Suitable strategies should be {ormulated tc

2046 Tte Che(erad Ac@untant June 2OOB

June2008 TheCharteredAc@untant 2047
 rmr5wer€*-rrq*RtFBt{tGQssfr!,s"r8|rt&n8Ji;gffi ir$i:gfrkinqa.$litt&1ltlfi
a Att#dcttliirjs*i{
"-@

e n h a n c c a ( ) n l p d ti t i \ . e a c i \a n i J g e b , r : c d ( ) r r
errvironmerrtal mJn;lgentent so that rtctrons
can be tr,rnslrted into benefits,costs into cosr
r e c l u c t i o n .c , r s h , r u t f l o wi n t o c a s hi n f l o n , t l r l o t r g h
increasecl volume of production and sale, end
intrease ir: custonrer base. This n-ill improve
.clrporilrc. environmental
acldressthe environmental denands placed upon
BusinessObiecti
, ectr\:es
t h e m b ] ' r h e s r a k e h o l . t e r sl n d r h e : . ' c i c r t . r , rh r g e .
T o t a k e a d v a n t : r g eo f t h e p u b l i . : e n ' . i r o n m en t a l
c o n c e r n s n - i t h i n a c l y n l r n i c n r . r r K e rp l a c e . t f i g
corporatcs need to inaorporrltc nlot-e ani{.litore
tmportant environ ment il .jirn,:nsr,,ns into their.
decision making processesanil businessstraregies
perfornr,tnce .rnd thus putting in olace ;i srraresl. En..'ironrnental
Management S,vstern:is shos'n rn Figure J.
Figure - 2
EnvironnrenralPressures
Srr.rtriir l:n,.ironniental I![anrgernentSrstem (SEIlS) is .r
crrrrlprcllcrl-\ivcsvstern thJt sug{esis the iine-tuning of thc
h u s i r r c sosb j r ' c t . r e st , ; a d j u s t n ' i t h t h e e n r i r o n m e n t a l p r e s s i t r e
t h r o u g h . r s r r . r t e g i ci i n k t h a r l e a d st o c o m m i t n r e n r a n d p o l i c l
formulations. Business objects and environmental pressures
rre nr)t separatelv pursuerl f'ut tlken together to formul;rte
business plan. Environmentai mrnagement and prorecrion qe rilte'fiEncn
activities .rre taken into consideration while developing rhe
pr,,duct and its use, selecting the technologies end production
SAGEACCPACERPVer 5
process.rnd rrltirn.rrch decidine oir marheting and producrion
c l r , , , r , r " lt o ' a t i s f l t h e c u s t o n r e r s ' n e e . i s . r n d c x p c c r a r i o n s . rcilmr,sTtlffitr
Accordingll', resources arc planned, nobilised and put to v,rith over 267 New Featun
use. The per[orrnance (in terrns ol frnancial achievement and
makingit the mostpreferre
erli'ironmenral performance index) is measured, evaluatedand
monrtoreclalong r.ith actual protluction and saleslunctions for ERPamongsmalland
661y1i111rtrus improvenrent. Planning. implenrentine, evaluating, mediumbusinesses
ruc'nitoring encl action taking .rll are equally irnponant for the
succcssof the SEMS, as thc journel. of achieving excellence rs Sage Accpac ERP is the wo.ld s
an unending process,rhere is no hnish line. leading ERP solurion built on a w(

class, objecl oriented. multi tiere(

StrategicLink To quote Klassen and Mc Laugirlin (1996): "The long term
archileclure. Designeo tor compan,
goal of environmental maneqement is to move tow'ards...
of all sizes, it can be deployed b
cons.i.lerirrgenvironmental aspl"ctin an integrared fashion in
as a web based and cirent serve
product desiqn, tire entirc marufaclrring pr:ocess,rnarketing,
application, and is the foundatior
product delivery and use, consurners sen'rce, and post
an integrated set ot end lo-end
consumers product disposirion".
business manag9menl appl,calions
Cr;nchrsiolr
It is part of the Sage Group iha

l;;m;Y;:":;;:.im:l;;""...'.'iji:?:::,i'ffi
::i,i
perforrnance w.iil emerge as a key to sustainabledevelopment.
has over 5 million cuslomers in tl
' SMB segnrent globally.

So, in thc pursuit o{ their economic interests, they have to

Planning Resources-Manpoe-er, Pay more altention to the nianagement ar:d measurernent of __1cc9ulll9jl? oerRarioNs
environmental performance. pRoJEcr & JoB CoslNG
Technology etc.
Economic prosperity and environmentalmanagementare PorNTOF SAL[.
the rl'o major links in the value chain a company needsto BUSINESS
INTEITIGEI{CE
& REPORTI
pursue.It wil) only support sustainabledeveloprrrent.The MANUFACTURING
cost associatedq'ith environmentalmanagementwill not E-Cottl,tERcE
reduceprofit but increaseit many fold in the long run. This WAREHoUSE
MA|IAGElErJt'
Measurementand Evaluation is the neq'theory of sustainabledevelopment.The leadersof
CUSToMER MANAGETEN
RELATIoNSHIP
the ct,rporateshave to realisethis new theory - the sooner
the better.
The regulators and the government need to emphasiseon
the corporate environmental performancerepon so that
essentialquantitativeinformation basedon cenain clearand Fgr a DemoContoct:
Review and Improvement
unambiguousparametersis madeavailableto the public. The Ph : 91-fi-41002488 I U t a2
(A continuous process) data should be presentedin a comparableway to judge the email : salesindiaesage.com
website : ffi.sageaccpac.com
environmentalperformanceof the corporates.D

2M8 TheCharteredAccounlantJunaZO0S
June 2008 The ChartaredAc@untant 2
 Views on D&O Liability InsurancePolicy and Corporate Governance
Companies should inform non-executive
directors of their insurance cover before they are
appoinred, as suggestedby the Higgs Repon of
UK (|anuary
03).
Having D&O liability insurance helps retain
experienced
directors.
D&O liability insurancepremium is good value
for money (premiumpaid vs. risk cover).
D&O liability insuranceis an essentialpan of a
listedcompany'sinsuranceprogramme.
D&O liability insuranceisanessential
componenl
of corporategovernance.
Our Directors and Officers arevery interestedin
the scopeof D&O insurancecover.
From the above survey report we can realise
the role of Directors' and Officers' Liabii-
ity Insurance in ensuring the best practicesof
corporate governance by transferring the fi-
nancial risks from individual director, offi-
cer or entity to the insurancesector and then
to the capital market through Advanced
or Alternative Risk Transfer (ART)
mechanism of Insurance being wide-
ly used by the insurers and reinsurers in
the USA and UK in view of high probabil-
ity and severity of such insurance claims. The
following is the trend of insurance claims
in Directors and officers' liability insurance
policy in the USA, UK and other
advancedcountries.
2042 TheCharteredAccounlantJune2008
Gorporate EnYironment
'Disagree
Managemelt'
-StronglyAg..e Aggee-"
24o/o 49o/o 23Yo 4Yo A Key to $ustainable Deuelopment
'With
increasingawarenessamong the
lAn/o 5an/o J0o/o 100a stakeholders, regulators and society at
large about the environmental prob-
lems causedby economic activities,
5Yn 467o 39Yo laYo the corporatescan no longer remain
indiffeient to green issues.They can
delink environment with their busi
nessstrategiesonly at their own peril.
26"/u 54"/o 12o/o 8o/o
The only option for them for sustained
long term growth todaY is to Pursue
botf, the to.i"Ul' and environmentalll'
8o/o 60% 23o/o 90k resDonsiblepracticesand economic
interestsat ihe sametime. This article
discussesthe emerging conceptof cor-
porate environment managementand
60/o 56o/" 12o/o 6Yo
its role in sustainabledevelopment.
I
Claimant Distribution
lVorld
ver the years,particularly since
\?ar-II there has been enormous
growth of the Corporates with huge
I am sure, the Indian managers,including accumulation of lVealth and economic po'n'er
directors.officersandAudit Committee members - DB. P.K. Chakraborty
Indeed, more than half of one hundred larges
in the MNCs, areto facesimilar trend of,D&O (he authals a member of ke lnsttute He can economiesin the world are nor countriesbut
claims {rom shareholders,financiers,customers' be reached at rcikumaficz@gmat coml
corporations.The total salesof GeneralMotors,
employeesand regulatorsin the regime of good \(J-man and Exxon exceedthe grossdomestic
corporate governance. Vithout DtrO Policy product (GDP) of India. Lnternationally
they cannot managesuch rapidly rising liability corpo."te logosaremore Powerful symbolsthan
claims from various stakeholdersin the highlv natiott"l flags.This is one sideof the story' On
litigated corporate environment.D
Juhe 2008 The CharteredAmuntant 2043
 the other hand, q.irh the qronrh of economic
cler,elopmgnl and progressof civilis.rti,rnfor
which corporatesare assunring the major role,
q'e have been damagingand.lesrrr,,,-ing the
vitality of our environment.T'heenvironmenr
w'ith its resourcesis deterioratingn'orldr.ide
at an unexpectedly increasing rare.The World
Bank haspeggedenvironmentaldamages in India
at over $9.2billion, s'hich is 4.5ozi' of rhe Gross
DomesticProduct (GDP) in termsof healthand
productivit,v impacts.We are consuming20')6
more natural resourcesthan the earrh could
produce.Fossilfuel consumprionhas increased
by 70ao/obetween 796I and 2000. Nearly 4Oolo
l of the terrestrialfresh warer and marine soecies
havegoneextincl in thiny yearsbers-eenl97O
and 2000. (I inx o1'India, Ortober25, 20041
The memoriesof Exxon Valdez Oil spill and
Union Carbidegastragedystill haunt us. Given
the rate at which we are polluring the v/arer
and air, cutring the trees,eroding the soil and
warming the atmosphere,the days are nor far
of rvhen the total ecologicalsystemwill loose
its balanceand dereriorareto such an extent
that the eanh will no longer have enough
vitality to sustainits habirants.Unfonunately,
v'e are realising abour the deadly consequences
of destroying ecosystemthe hard way. As an
American Proverb goes:"Only vrhen the last
tree is cut, only when the last river is polluted,
only when the last fish is caught only then
they will realise that you cannot ear money".
Pollution hasno political boundariesand affects
the eanh as a vrhole. Environment degradation
has emergedas one of the gravestthreats to the
humanity.
Vhile carrying out their industrial and
business acriviries, the corporates, in some
way or the other, directll' or indirectly, are
creating various environmental problems like
soil erosion, land degradation,pollution of
air and warer, deforestation, over exploitation
of non-r€newable natural resources and loss
2044 TheCharteredAc@untant June2OOS
of bio-diversitv tl.r.rr need to be restncts6.
restored and properlv nourished ro reducr irr
damaging effecrs. Cen n-e allow this situarion 1n
continue?Shall n e c,rntinue to pursue onll ',he
goal of profit maximisation even ar rhe cosr of
environmental degra.l,rtion and threat to hrrman
race? $urye
cannot sustlin any form of econoqil
development for ions if we do not take sx;
environment into consideration. Economic
developnent can deliter long-term benefits onlv
q hen it i: rnvirurrnrtnr-friendll'.The corporarcr,
as imponant vehic.lesof economic growrh, can
play a crucial role in this regard.
Stakeholders'Awarenessand Pressure
Over thelastfeq'years,the expandingdimensions
of emergingenvironrnentalissuesand increasing
an'arenessabout them among the different
stakeholdershas been putting pressure on the
corporate citizens for better environmental
performanceand for putting in place integrated
environmental management approach v'hile
pursuing their corporate activities. Thanks to
vigilant mediaanclenvironmentalists,corporates
are increasingly being put under scanner for
their approach toq'ards environment. As
such, corporates are increasingly reaiising
that if they want to stay in business and
maintain their goodwill, they cannot ignore
environmental concerns. Consequently, more
and more corporatesare revisingtheir business
strategiesto incorporate environment-friendly
practicesand me.rsures. Corporateenvironmenl
managementis now considered as rn integral
p^rt of any good businessstrategy. There has
been rising expectation among the customers,
socially concerned invesrors, environmental
interest groups and regulators that corporates
become socially responsible and proactive on
environment front. As such, management o{
environmental issues are gerring top priority
in corporate decisions pertaining to capital
inveslments, cost derermination, process/
product design,performanceevaluation,etc.
Environmental Performance
Saurn: AdaPted -t'nn lflllbrd and Grttrldson
hfanagenent and Btsittus
'ltrategy',
Enururmenta/
Prhtishittg
Legat Framework for Environmental
Issuesin India
Environment Protection has always been a
pressingagendain India. The Constitution ot
india vlde-Anicle 48A imposes a fundamental
dur;'on every citizento Protecland improve
the natural environment.IJnion Government,
in coordination with various ministries and
State Governments, has put in place several
legislationsfor environment Protection.Some
majorlegislationsinclude:
r Company as required by the Companies Act,
The FactoriesAct, 1948.
' Merchantof ShippingAct, 1958'
o The N(/ater (?revention and conrrol o{
Polludon) Act,I974.
' The ForestConservationAct, 1980'
' Management
The Air (Prevention and Control of
Pollution) Act, 1981.
r The Environment Protection Act, 1986'
r The Indian FisheriesAct, 1987.
' The Hazardous Waste (Management and
Handling) Rules, 1989.
Entplove.'s
(1993) . The public Liability InsuranceAct' 1991.
Pihnan
o
Motor VehiclesAct, 1991.
. The National Environment Tribunal Act,
1995.
All the industriai units are requiredto compl.v
with a number of norms and furnish a rangeof
information under different legislationsbefore
gerting clearancefrom stateauthorities.Further,
Ministry of Environment and Forest has made
Environmental Audit mandatory for all the
industrial units who require approval from the
State Pollution Control Board. Environment
related issues and policies are required to be
disclosedin rhe Director's Report of a limited
1956.Of late, two series,ISO 14000(1996) and
ISO 14001(1999), have been issuedstating the
industrial norms to be followed by the industrial
units.
Cost Benefit Analysis of Environmental
Before embarking on any environmental
managementendeavour,the managementof
any c;mpany wiil be interested to know the
cos6 and benefits associatedwith this exercise'
If benefits exceedthe costs,they will naturally
be more interestedin the proiect asit will add to
Jun€ 2OO8 The CharteredAmuntant 2045