Functions of Third party Verifications of Environmental Reports

Discussion Paper
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Along with the growing influence of the environmental factor on business management, there has been an increase in the number of companies which compile environmental reports. According to the Survey on Environmentally-friendly Corporate Behavior carried out annually by the Ministry of the Environment, there has been a rapid rise in the number of companies compiling and publishing environmental reports: 197 in 1998, 270 in 1999, 430 in 2000, and 579 in 2001. In recent years there has been heightened environmental awareness in terms of public opinion, and companies' environmental behavior is becoming more and more important. This trend is likely to continue in from now on.
The information contained in an environmental report is a record of a company's action targets and results relating to environmental conservation as well as the environmental impact its business activity gives. Such information is published externally and used in business evaluations, for example, for eco-funds or ranking companies. Although environmental reports are compiled and published independently, the reliability of the information is important for company outsiders who use the information published.
One increasingly popular method of securing the reliability of the information is for the compiler of an environmental report to request the opinion of a third party and to attach this as a third party statement. Nevertheless, not only do the functions required of third party statements differ widely, but they are not necessarily clearly defined. Moreover, since the first third party statement in Japan was published in 1998, there has not been any detailed fact-finding investigation into practices concerning third party statements. This study will therefore analyze almost all the third party statements published in Japan during the four years from 1998 to 2001, define and categorize their functions, and consider what form third party verifications of environmental reports, if they are to have an information guarantee function, should take.