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Chapter 5: International Corporate Governance > Towards a Common Language

Towards a Common Language

At present, there is no common language of accountability for corporate functioning. Simon Thomas and others have suggested a new measure in Integrated Environmental and Financial Performance Metrics for Investment Analysis and Portfolio Management (vol. 15, no. 3, May 2007).

“Industries produce both salable outputs and undesirable residuals. Many companies generate and discharge enormous amounts of waste, much of which pollutes the natural environment and imposes damage costs on households and other enterprises. Economists call these damages ‘externalities' because their costs typically fall not on the firms that discharge the wastes but on those that suffer the damages. Consequently, accounting systems don't ascribe these costs to their source or even quantify them systematically . . . . The TRUEVA measure is useful to investment managers because it integrates a financial measure of a company's environmental exposure with a superior measure of the company's profitability. A company with profits that exceeds i....


  

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