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Environmental
issues rose to prominence in the last decade , so the action
plan for sustainable development- Agenda 21 was adopted by
the world community in Rio in June 1992. Corporations all
over the world have realized the significance of environmental
issues and started communicating the social, environmental,
health and safety issues in addition to customary financial
disclosure in order to gain shareholder trust in the process
of organizational ability to manage risk, reduce volatility,
and enhance transparency.
To
understand the potential of environmental value creation,
one has to understand the significance of intangibles in the
shareholder value equation. The intangibles include human,
intellectual, social and structural capital of an organization
that add value but are not traditionally accounted for the
balance sheet. The study entitled 'Measures that Matter' established
that the correlation between intangibles and a company's price-to-earning
ratio varies according to industries that have a close relationship
between key value drivers and shareholder value creation.
Figure 2 establishes the close link of the tangible and intangibles
in value creation process.
Market
demand for greater transparency, ethical behavior and corporate
governance has led to an increase in voluntary disclosure
as well demanded by the constituents of stakeholders at large.
Figure 2 shows that the quantum of contribution by the intangible
asset groups has been more linked with the creation of shareholder
value. |
