1. Introduction to Sustainability Accounting

2. Learning outcomes
Understand the need for and scope of sustainability accounting
Understand the limitations of conventional accounting concepts & protocols in furthering sustainability accounting
Examine some initiatives and case studies in sustainability accounting
Consider future changes.

3. Sustainability
Sustainability can be defined as relating to development which “meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Report 1987; Gro Harlem Brundtland was a Norwegian cabinet minister)
social justice
eco-efficiency
eco-effectivenes
“Sustainability is, thus, a direct challenge to the economic model of the world that runs through conventional accounting and finance.” (Gray, 2002:372)
CERES principles 1989 (Coalition for Environmentally Responsible Economies) cover:
protection of the biosphere
sustainable use of natural resources
reduction & disposal of waste
energy conservation
risk reduction
safe products & services
environmental restoration
informing the public
management commitment (at Board level)
audit & reports (self-evaluation of progress in CERES adoption)
Global Reporting Initiative
framework for transparent reporting

4. History of sustainability accounting
Lamberton (2005)
“Sustainability accounting—a brief history and conceptual framework” in Accounting Forum
Paper is available on Mole
Reviews methodologies
Sustainable cost
Natural capital inventory accounting
Input-output analysis
Triple Bottom Line (Elkington 1994)
GRI guidelines for sustainability accounting
Provides a framework
To measure the performance of an organisation toward the objective of sustainability

5. Sustainable cost
Sustainable Cost is the Hypothetical cost of restoring biosphere
based on notion of capital maintenance
Monetises environmental impact
some natural capital is irreplaceable
e.g. extractive minerals; specie loss
indeterminate where no market or fiscal mechanism operates
cap-and-trade & carbon markets are a narrowly-defined and hence limited in effect

6. Natural capital inventory accounting
Natural capital categorised as
critical
non-renewable
substitutable
renewable
As a quantitative, non-financial estimates
stock, consumption, replenishment
But difficult to categorise & express in unitary terms and difficult to collect data
Gray suggests four categories of natural capital.
1. Critical, for example, the ozone layer, tropical hardwood, biodiversity.
2. Non-renewable/non-substitutable, for example, oil, petroleum and mineral products.
3. Non-renewable/substitutable, for example, waste disposal, energy usage.
4. Renewable, for example, plantation timber, fisheries.

7. Eco-balance; mass-balance
INPUTS = WASTE OUTPUTS
expressed in quantitative terms over a period of time
PRODUCT
PROCESS
PACKAGING
EMISSIONS
NATURAL
RESOURCES
MATERIALS
ENERGY
process
reduce waste & leakage
raise productivity
re-cycle
re-use
replace inefficient process

8. The ‘triple bottom-line’
Triple Bottom Line (TBL) Term coined by John Elkington (1997) in his book
“Cannibals with Forks”.
Elkington is founder of SustainAbility consultancy
TBL is a conceptual rather than quantitative notion of an organisation’s performance in terms of the economy, society, & environment
TBL recognises inter-dependence, conflict, balance & constraint in pursuit of sustainability
ref

9. The TBL TBL But TBL is just an Economic Top-Line
Elkington is critical of traditional accounting’s concepts, internal focus, & narrow accountability
He argues that a paradigm shift is necessary for
Shift from shareholder to stakeholder
More transparency
An embrace of human & social capital (as well as economic)
(n.b. remember a paradigm shift has less change than a change in episteme)
But TBL is just an Economic Top-Line
Society & environment sit only on the Bottom Line.

10. The social bottom-line
Ethical business
stakeholder engagement
human & social capital, built by trust
equitability & fairness as performance criteria
Aspects of social responsibility
Internal employee relations
External supply chain relations
Product responsibility
Citizenship, volunteering & community relations
Human rights

11. The environmental bottom-line
Consumption of
materials
energy
water
Emissions of effluent & waste
Transport supply chain logistics aspects
Impacts of products & services
As well as ecological aspects such as biodiversity & habitat loss

12. But Sustainability really needs a Triple Top Line (TTL)
The Triple Top Line
But Sustainability really needs a
Triple Top Line (TTL)
- where every act generates social and ecological as well as economic benefits.
A TTL is the sine qua non (Latin for “without which nothing) of a “Sustainability-Driven” Enterprise
A TTL does not cast society and environment in a negative way
as additional costs (e.g. environmental taxes) or limits to growth
A TTL requires that we discuss VALUES not COSTS

13. Triple Top Line & Bill McDonough
The Triple Top Line
Triple Top Line & Bill McDonough
The conventional design criteria is a tripod: Can we profit from it? the company asks. Will the customer find it attractive? And will it work? Champions of "sustainable development" like to use a "triple bottom line" approach based on the tripod of Ecology, Equity, and Economy. ... But in practice we find that it often appears to center only on economic considerations…
The real magic results when industry begins with all these questions, addressing them up front as "triple top line" questions rather than turning to them after the fact. ... In fact, often a project that begins with pronounced concerns of Ecology or Equity (How do I create habitat? How do I create jobs?) can turn out to be tremendously productive financially in ways that would never have been imagined if you'd started from a purely economic perspective.“
— from William McDonough, Cradle to Cradle: Remaking the Way We Make Things (2002, North Point Press)

14. Global Reporting Initiative
The GRI voluntary corporate reporting standard
Multi-stakeholder network of experts with a secretariat in Amsterdam
See the Global Reporting Initiative webpage
It is a Guiding Framework for reports on such as
economic impacts
labour practices
human rights
product responsibility
community, anti-trust, & corrupt practices

15. Global Reporting Initiative
The GRI is comprehensive & very detailed
Hence is expensive to implement
not for SMEs!
GRI standard disclosures include such as
strategy and profile
management approach
performance indicators
Guiding framework
economic impact by stakeholder
environmental impact
labour practices
human rights
product responsibility
community, anti-trust, & corrupt practices

16. Codelco sa
Codelco Sa, a Chilean company ranked Global #1 copper producer, produced a Sustainability Report in 2007 that achieved GRI’s highest rating
But is Codelco SA working towards a truly sustainable world when its operations look like this…
Pages:
4 cover & endorsement
20 process
43 assurance
45 policies
56 strategy
59/60 stakeholders
67-88 environment performance
92 value added
100/1/8/9/10 social performance
114 human rights
117 community
120 TI system
126/7 divisional performance
GRI checklist
So what does GRI sustainability reporting actually mean & accomplish?

17. Accounting for Sustainability
Other
Accounting for Sustainability
Initiatives

18. The Prince’s Project Set up 2004

19. The Prince’s Project: Cases
Some companies can benefit from sustainability. BT for example can improve communications and reduce the need for physical movement of people and information.

20. The Prince’s Project: Cases
A view from BT’s Leadership Panel
‘Virtualising infrastructure’ can be a good thing.
i.e. use telephones, Skype & other electronic communications instead of travelling to meetings….. or courses?
i.e. this kind of sustainability is good for BT’s business.
BT argues that “New ideas and technologies are needed to transform the way we live and work”.
BT’s report has validator’s that I trust
(to a degree) – i.e. claims etc are believable
VERY IMPORTANT STEP IS TO GET SUPPORT OF INFORMED STAKEHOLDERS
BT’s Sustainability Review is on Mole

21. The Prince’s Project NB The Prince’s Greenhouse Gas Emissions
Is the Prince sustainable?
Is the Prince a good role model for sustainability?
- for resource use efficiency?
- for social equity?

22. CIMA: Corporate Sustainability
2010
Available Resource

23. CIMA: Corporate Sustainability

24. CIMA: Corporate Sustainability
Extracts from the report’s conclusion
Leffin says that the ‘accounting mindset’ is well suited for sustainability programs because of the finance and accounting’s long-standing commitment to establishing structure, demanding accuracy and delivering credibility to organizational initiatives.
The extent to which sustainability is integrated into the value creation process of the organization will depend on the skills and competencies of accountants to facilitate effective implementation, accurate measurement and credible reporting. To remain relevant the accounting profession must take ownership and embrace business
sustainability.

25. Global Sustainability Accounting
CIMA Report 2010
Sustainability in Emerging Markets
(Available on Mole)
India
Many of India’s leading companies, such as Tata, which were built on industrial family dynasties, already had a deeply
rooted sense of social responsibility, based on strong community and patriarchal traditions.
China
It can now be seen that China is moving from only just developing an understanding of the concepts towards implementation and evaluation of CSR initiatives.

26. Global Sustainability Accounting
CIMA Report
Sustainability in Emerging Markets
(Available on Mole)
Extracts from the report’s recommendations:

27. Tomorrow’s Balance Sheet
CIMA & Tomorrow’s Company discussion paper, February 2011
available on Mole
Two Points from their Conclusions
Some of their Recommendations
Sustainability issues must be embedded in business models, organisational strategy and decision making processes so they can be captured and reported on.
Management accountants are encouraged to help ensure that businesses measure performance to an appropriate timescale to assist in the delivery of sustained and sustainable success, and to define and adopt new ways of enabling this.

28. What Next? EU Energy Official
“2020 carbon dioxide reductions will be meet by industrial evolution; 2050 zero carbon dioxide emissions will require an industrial revolution.”
Research Programme announcement, Brussels, 2010.
Is a “Triple Top Line” the revolution we need?
With the Triple Bottom Line, do social and environmental aspects appear only as costs?
Can a “Triple Top Line” integrate incommensurable values? - i.e. personal, ecological and economic
Management Accounting could develop a “Triple Top Line” Scorecard.

29. Intrinsic Sustainable Development
ISD & Episteme Change
It is happening
- so much evidence of fundamental change such as WBCSD report & others cited in these lectures
It may not be possible for the world to become sustainable if events are observed only through an economic or financial lens
Change from Traditional business world to new Economic Ecology World (ISD Book)
But the economic way of thinking is so embedded in Modern Life
- more than that, it is Modern Life
- We need the transition to the Primal Age
It is a fundamental revolution that has happened in Natural Science – i.e. natural science is based on a new possibility of knowledge
Human Sciences will adopt this new possibility of knowledge… or new episteme
Intrinsic Sustainable Development Book (Birkin&Polesie 2011)

30. Primal Accounting Primal Accounting – How we will do it?
ENDNOTE: ISD & Episteme Change
Primal Accounting – How we will do it?
Will we use a Sustainable Balanced Scorecard?
…..in a Primal World with QC’s Morality, Greybeard’s Business Typologies and the Older Boy’s Diagrams and ISIS Concept?
(Chapter 11 ISD Book, Birkin & Polesie 2011)
Or will use something new such as Agent Based Modelling (ABM) that can represent individual agents in planning and performance appraisal tools using massive, many million agents in BIG NUMBER computer computations?
e.g. Sheffield University has modelled the European Economy using an ABM – see Eurace Project Page on Flame Website
My current research is to develop an ABM of Accounting for Sustainability

31. Agent Based Modelling foundation for Primal Accounting?
ABM can replicates realistic relations between people, society and ecosystem… a realistic SIM write large… using
millions of agents that develop autonomous behaviour just as in real life.

32. World Leader’s Forum

33. taken from a presentation prepared for the
LAST WORDS
Last Words
taken from a presentation prepared for the
World Leader’s Summit
Dubai 2015

34. World Leader’s Forum

35. World Leader’s Forum

36. World Leader’s Forum

37. World Leader’s Forum

38. Revision Revision Questions What is ISD?
What sustainability accounting concepts does Lamberton identify?
What is ISD?
What may be used in Primal Accounting?
Remember to do your own explorations of the material I have provided to improve your knowledge and understanding and to get a few good illustrative examples from companies, reports and other authors.