The current status of environmental reporting by Indian companies

Consumers nowadays expect firms to meet high health and safety standards for workers, respect human rights, protect the interests of consumers and meet environmental standards, regardless of where they operate (Smith, 2002). Hence, it is expected that companies provide information about their environmental performance and policies, together with management systems in operation to support them (Fortes, 2002). It may appear that greater attention to environmental matters may lead to an increase in costs and hence lower profits (Fortes, 2002). On the contrary, environmental reporting choices may influence stakeholders’ interpretation of firms’ financial performance and enhance investor confidence, leading to a lower cost of capital and resulting in a rise in stock valuation multiples together with enhancement in stock liquidity and an increase in the interest of institutional investors (Cormier and Magnan, 2003). As business organizations compete in the global economy, they must do so within the constraints of a society demanding ever‐ increasing environmental accountability. This accountability consists of an increased public scrutiny of both the environmental performance of the firm and its public disclosure of that performance (Al‐Tuwaijri et al., 2004).