Environmental Accounting Practices of Listed Companies in Japan

The number of Japanese corporations which publish environmental reports has been increasing very rapidly. According to the ''A Survey of Environmentally Corporate Behavior'' [Ministry of the Environment (2001a)], the proportion of listed corporations surveyed which disclosed environmental information showed a rising trend from 35.7 per cent (1998) to 40.9 per cent (1999) to 51.0 per cent (2000).Out of these companies the proportion of those which published environmental reports also increased from 30.9 per cent (1998) to 37.3 per cent (1999) to 45.9 per cent (2000). This sort of trend is likely to increase further, judging from the publication of ''Environmental Reports Guidelines (Fiscal 2000)'' by the Ministry of the Environment (MOE) in February 2001 and the ''Environmental Reporting Guideline for Stakeholders'' by the Ministry of Economy, Trade and Industry (METI) in June 2001.

The number of companies which disclose environmental accounting information in their environmental reports is also on the increase. During the first half of the 1990s when the word ''environmental accounting'' was not in general use, only a handful of corporations measured environmental costs. However, according to the MOE's survey (2001a), out of the above-mentioned listed corporations which replied that they disclosed environmental information, the proportion which disclosed environmental accounting information showed a steeply-rising trend from 10.4 per cent (1998) to 20.9 per cent (1999) to 27.0 per cent (2000). Concerning the question on the introduction of environmental accounting, 17.3 per cent replied that they had already introduced it, while 34.2 per cent replied that they were considering its introduction. These trends were obviously influenced by the environmental accounting guideline published by the Environmental Agency (now the Ministry of Environment: MOE) in May 2000. The draft guideline was published in 1999. Furthermore, both of the MOE's and the METI's environmental reporting guidelines recommended environmental accounting information disclosures in the environmental reports. Therefore, more and more companies are expected to introduce and publish environmental accounting.

Although such guidelines are likely to have a considerable influence on environmental accounting and reporting practice, they are not mandatory rules, but voluntary. The methods and procedures for environmental accounting in the MOE's guideline are quite flexible and even ambiguous. The guideline leaves much discretion to companies. This means that how and to what extent the guideline influence environmental accounting practice becomes an important research issue. The object of this study is twofold: to clarify the special characteristics of Japanese environmental accounting practice by examining the environmental accounting information disclosure by Japanese corporations; and to analyze the influence on Japanese corporations by the MOE environmental accounting guideline. Before examining these issues, some main governmental initiatives on environmental accounting and previous studies on Japanese environmental accounting practices are briefly studied.