Monthly Archive for August, 2010

Is Water the New Carbon?

Published on August 19, 2010 in Economy. 0 Comments

It will be no news to anyone that corporate sustainability and environmental concerns have so far centred around carbon release and oil/gas longevity. However, at least in some areas of the world, a more localised problem is the usage and (actual or potential) shortage of water.

This issue of ‘water footprinting’ is likely to become as important as’ carbon footprinting’. Like any other scarce resource (Oil? Money? Time? Skilled workforce?), governments, organisations and society as a whole are becoming more aware of the issues. Although of course water is a fully renewable resource, its distribution and management is far from easy.

Risks may arise from excesses (flooding), shortfalls (in either water as a whole, or specifically clean water) and the security of supplies. Financial issues revolve around direct pricing (supply and demand, from an economic perspective) but also the indirect impact of any other issue, for instance lost production. As with almost any risk, there is a financial impact if it occurs, and it is this aspect alongside society issues, that businesses need to be concerned about.

What should business be doing?

Unlike many other materials, its supply is unpredictable but taken for granted by many. Its price may appear to far understate its value, although this is only evident when its supply is disrupted. Business should strive to become more aware of its water footprint – although the concept is relatively new, some companies already publish water footprint statistics.

Methodologies are available from Chapagain and Hoekstra, the WBCSD and The Water Footprint Network. There are not, as yet, any agreed standards for measurement and management.

Clearly, measurement is not enough if significant issues occur – the benefit of measurement is in being able to utilise it to manage a reduction in water usage, and therefore reliance, which in turn will reduce the risks that organisations are exposed to. This is not just an issue for agriculture and commodity production, but an issue globally. Developments will be interesting to follow.

Waste is Evil!

Published on August 11, 2010 in Management. 0 Comments

It seems to be never out of the news nowadays that we should recycle everything feasible and dispose of as little as possible.

Why? Because waste is evil! For those who know me, the thought that I may have run around a conference room screaming (yes, literally) such a declaration may be surprising. But that I did!

The elimination of waste in a manufacturing environment (my background) is an obvious route to better financial (and environmental) results. But why should waste reduction be the unique preserve of manufacturing industry? How can the principles be applied within an organisation that doesn’t make anything?

The key is to view waste in its broadest sense i.e. anything that is not useful.

  • Wasted time – how many reports does an organisation produce that are not used, or only certain parts are used?
  • Waiting time – how much time is lost waiting for other people to get things done before you can continue?
  • Rework – how many things are reworked either because the first product was of poor quality, or the original requirement was not made clear?
  • Added value – basically, anything that does not contribute directly to the vision of an organisation, or directly support others doing so, can be regarded as probable waste.

The identification and elimination of waste is one of the key deliverables of process mapping, often referred to as process re-engineering or process optimisation – one of my pet subjects.

If organisations in the current climate are to continue to firstly survive, then enable themselves to grow and respond quickly when the recovery is in full swing, then the efficient and effective utilisation of expensive resources (of which time is only one) is critical.

Perhaps now, when things are a little quieter, is the optimum time to consider business process optimisation.

The Future of UK Financial Reporting

Published on August 3, 2010 in Financial Accounting. 0 Comments

There is, apparently, a ‘flurry of activity’ at the ASB as it develops a new accounting framework for UK entities…

The proposals, tentative at this stage following consultation, are intended to apply to all non-public sector entities. The framework proposes that ‘tiers’ are adopted, based on levels of public accountability:

  • Tier 1, for entities with public accountability (application guidance on the definition will be provided), will report under EU-adopted IFRS.
  • Tier 2, for entities with no public accountability, will report under IFRS for SMEs, replacing existing FRS and UITF Abstracts with the IFRS for SMEs with certain amendments.
  • Tier 3, for small entities, will report under FRSSE.

As well as the above, the ASB proposed to reduce disclosure requirements for subsidiaries in tiers 1 or 2 (without public accountability) and whose parent produces publicly available financial statements.

The ASB’s will be developing a FRED for consultation. To this end, it has issued a request for responses to aid an impact assessment, to be received by 20 August.

No doubt once the final edicts are issued by the ASB, the incorporation of IFRS into UK Reporting will be clearer. We will see what the next steps are…