Environmental costs – Chevron in Ecuador.

(Photo from Economist.com/AP)

In one of the modules I teach at university, I try to introduce undergraduate accounting students to several important issues facing businesses. On issue is sustainable business.  And what has that got to do with accounting who might ask? Quite a bit actually. For one things accountants are good at collecting and reporting on information – these skills can be applied to monitoring waste, energy, water usage as well as evaluating sustainable investments.  But maybe a more important point is that a sustainable business is one which is likely to be around in the longer term – it is thinking about how environmental issues might affect its costs and revenues.

On major cost for firms that night not be that good on environmental issues is legal fines and other litigation costs. A piece in this weeks Economist (see here) tells of a $9 billion fine levied against US oil firm Chevron by a court in Ecuador. There seems to be a bit of a background story about corruption and so on, but the sheer size of the fine would put  a big dent in any firm’s profits.