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Indonesia to get 'Green' accounting standard

The Office of the State Minister for the Environment signed a memorandum of understanding (MoU) on Tuesday with the Association of Indonesian Accountants (IAI) for a collaborative effort to establish a new accounting standard that would enable financial statements to also reflect the level of environmental responsibility of companies.

Minister Nabiel Makarim said that with such a standard, annual reports would not only show a company's financial performance but also what it was doing to preserve the environment.

“We want the market to be able to see whether a company is environmentally responsible or not,” Nabiel explained.

Nabiel said the environmental performance rating program launched by his office recently had also affected the business operations of the firms that had received ratings.

The program establishes five categories, gold, green, blue, red and black, respectively reflecting company compliance with environmental regulations.

“The companies that were assigned a red rating told me that they have had difficulties in finding investors, export partners and in obtaining loans. Some also said their shares had weakened on the stock market,” Nabiel said, adding that these companies were now working to improve their ratings.

Nabiel said that the incorporation of environmental responsibility in financial statements would push companies to be more careful in dealing with their waste and the local environment.

IAI chairman Ahmadi Hadibroto, however, could not say when the new accounting standard would be implemented.

“We are now discussing it with all the stakeholders,” he said.

Meanwhile, head of accounting and disclosure standards at the Indonesian Capital Market Supervisory Agency (Bapepam), Anis Baridwan, welcomed the plan to make companies more responsible in protecting the environment.

“We welcome the minister's effort, but we don't know whether the standard should be a requirement or merely a guideline, as we would like to see companies applying it voluntarily, rather than being obliged to,” Anis said.

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