How to turn accounting into a lever for meeting the environmental challenge

What is accounting? First and foremost, it's an information system designed to support decision-making and accountability. So it's not just a question of seeing, but of seeing in order to act in an era increasingly referred to as the Anthropocene. This refers to the period in history when human actions have as much impact on ecosystems as natural forces.

Christelle Chaplais, University of Clermont Auvergne (UCA)Bastien David, University of MontpellierEugénie Faure, Audencia and Nicolas Antheaume, University of Nantes

The word connotes concerns about the long-term viability of human societies. Our work explores three dimensions through which accounting can take account of the impact of human activities on the environment, providing a basis for action.

The donut as a reference

The hypothesis of an unprecedented climatic, even geological, upheaval that scientists call the Anthropocene should lead everyone, individually and collectively, to rethink the way we act, consume and travel. The scientific diagnosis seems radical and shows the extent to which human activities are having an impact on the environment.

However, we must admit that it is extremely difficult today to determine to what extent each action and each behavior contributes to slowing down or accelerating the consequences of the Anthropocene. Without a common frame of reference, how can we set objectives and position ourselves?

There are a number of reference frameworks available to companies. They are mainly used by large groups that are obliged to publish non-financial information in their reporting documents.

Some private international bodies are in favor of covering only the ESG impacts of companies (environmental, social and governance impacts), with a simple materiality approach: in other words, the aim for companies is simply to inform investors about their risks as measured by ESG criteria.

On the other hand, the European Union is seeking to establish a framework for extra-financial reporting that takes account of double materiality, i.e. an analysis that integrates both the impact of a company's ESG risks and its impact on society. However, the connectivity between financial and extra-financial reporting remains fragile.

At the very least, the information provided enables us to determine the company's carbon footprint or its contribution to the UN's Sustainable Development Goals. However, very few benchmarks enable us to understand where the company stands in relation to the objectives set by scientists - objectives which, no more and no less, condition life on earth!

Many today are calling on organizations to change their compass and share a common frame of reference, for example by considering the donut theory for organizing their balance sheets.

This approach, developed by British economist Kate Raworth, places the company's activity between a social and societal floor, which incorporates the fact that we can't give up everything in the name of the environment, and a ceiling corresponding to the planetary environmental limits popularized by Swedish researcher Johann Rockström and his co-authors.

To provide a common methodology

This common methodology can only be effective if it is supported and promoted by an organization withlegitimate authority. In France, for example, this would be the Autorité des normes comptables (ANC).

To be legitimate, an authority on accounting for the Anthropocene would have to involve the producers and users of accounting information, based on recognized scientific knowledge.

No authority based on this model exists today. In fact, there is a multitude of normative proposals, most of them non-binding. A legitimate authority could take responsibility for :

• produce standards for the publication of environmental information;
• provide a methodology, an accounting system and the units of measurement (physical, monetary or other) needed to collect, calculate or estimate information. This could be an opportunity to propose units that are not monetary but homogeneous for all impacts. For example, we could consider measuring the number of years a company has left before its impacts prevent it from continuing to operate normally, once it has already consumed its share of viable economic space;
• provide a framework for the presentation of this information and give users access to the assumptions and calculation methods;
• ensure traceability of the information produced and its verifiability in the event of an audit;
• define any penalties for non-compliance with these obligations.

An American expert on reporting issues, Bill Baue, is even calling for the creation of an authority that would go further and be responsible for allocating global limit quotas on an entity-by-entity basis. He suggests calling it the GTAC, for "Global Thresholds for Allocation Council".

All concerned

Accountability and decision-making: accounting's mission is to make the responsibilities of the various players visible. Organizations and consumers alike must be able to understand the limits imposed on them.

For the Anthropocene to be visible to decision-makers within an organization, they need information to help them understand the consequences of their decisions on the state of the natural environment and society.

Decision-makers need tools that enable them to simulate the consequences of their choices: what will be the impact of packaging (cardboard, glass, etc., reusable or not), of a formulation (liquid or solid product), of a supplier (location, country of origin, supplier's wage policy)?

The same applies to the consumer. Accounting will make the Anthropocene visible if it can translate the act of purchasing into a contribution to an environmental burden, or to the respect of a social objective. In this respect, there is still a great deal of work to be done on the means to be deployed to help consumers, notably through product labelling.

The ultimate stage of success will be when our behavior has so internalized the Anthropocene that it becomes both present and invisible.

This article was written by a group of researchers as part of a collaborative "speed blogging" event organized in conjunction with the CSEAR France/EMAN Europe 2021 online academic conference. Speed blogging consisted in collaboratively writing an article on the conference theme of "accounting for sustainable development in the Anthropocene" within a limited timeframe. At the end of the event, 3 articles were co-written by established researchers, juniors and doctoral students.

Christelle Chaplais, Lecturer in auditing and accounting ethics, University of Clermont Auvergne (UCA)Bastien David, PhD student and Professor of economics and management, University of MontpellierEugénie Faure, PhD student in multi-capital SME accounting, Audencia and Nicolas Antheaume, Professor of Accounting for Sustainable Development, University of Nantes

This article is republished from The Conversation under a Creative Commons license. Read theoriginal article.