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November 1, 2009

Druckman takes Trucost challenge

One of the UK’s foremost figures in accounting for sustainability has taken on a new challenge leading an environmental data company.

Paul Druckman is a past president of the Institute of Chartered Accountants in England and Wales, chairman of the Federation of European Accountants sustainability policy group and chairman of the executive board of the Prince of Wales Accounting for Sustainability project.

Adding to his raft of positions, he recently became chairman of environmental data company Trucost. Trucost maintains a data base with information on 4,500 global companies, including the world’s largest.

There are two sides to the business. One is selling the data and services based on the data to investors; the other is providing the data to companies so they can see their own environmental footprints and impacts.

Druckman said he believes Trucost occupies a niche spot in the market.

“There are no other organisations doing what we do,” he told The Accountant. “There are other organisations that provide data, but it is not the same concept because we are maintaining, validating, standardising and monetising the data that we have.

“We have the data and the model to have a complete environmental footprint, it’s more than just about carbon. Some companies are doing different pieces of that, but not the overall complete set.”

Environmental performance

To date, much of Trucost’s emphasis has been on the investor side of the business, for example informing investors who want to know if a fund is low carbon.

“[Trucost can find] the best performing companies or the worst performing companies in terms of their environmental impact,” Druckman said. “If you want to build a low carbon fund, how do you know which companies are low carbon? It may not be that you only invest in the lowest, but at least you will see the ranking and make an informed decision.”

The company is making inroads into the public sector as well as the corporate sector.

“We have contracts on the supply chain side with local authorities and health care organisations,” Druckman explained.

“Some of them have incentives to do that through government schemes and incentives. Others just want to be best practice.”

Druckman’s role at Trucost combines the three areas of specialisation he has developed during the past 10 years – technology, sustainability and the accounting profession.

First, Trucost is essentially a technology solution. Second, its provision of environmental data hits the sustainability mark. Finally, Trucost converts non-financial environmental information into financial information.

“Trucost has the ability to make the accounting profession understand what all this is about because of the quantitative nature of the data,” Druckman explained.

Druckman said this financial data is a raw material that businesses can use to build sustainability issues into financial models.

“It has always been possible [to embed sustainability into investment decision making], but it is still a big learning curve for an accountant,” Druckman added.

“Accountants in normal practice must start looking at these externalities rather than just the financial return because they need to understand that the world is changing and there are other pressures on the behaviour of a company that will affect its value, and not just in an altruistic sense. Now here is something they can actually grab hold of and use with a clearer understanding.”

Druckman said one opportunity for Trucost is to move beyond being a separate data source and become embedded in what other organisations do.

“Accounting software houses could have Trucost environmental data associated with their accounting systems,” Druckman said.

“Going back to the accounting side of it, there is no reason why management accounts should not now include an environmental footprint.”

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