It might have been possible a decade ago to ignore climate change, but the recent catastrophic record temperatures, floods, droughts and forest fires on steroids confirm beyond doubt that our planet is experiencing system failure.
Kurt Sartorius Climate change activist, Professor of Accounting at University of University of the Witwatersrand
Climate change and corporate emissions
Currently, companies are playing catch-up and ESG reporting remains a buzzword that is still in the window-dressing phase. At the heart of all the phenomena influencing climate change, radical increases in global greenhouse gas levels predominate. From the viewpoint of the accountancy profession, we have to ask ourselves exactly what our role is in addressing climate change. Can the accountancy profession really make a difference? The biggest problem institutions like SAICA face is that many companies do not see their direct linkages with climate change and worry about the cost implications. To provide linkages and focus, companies can identify a single target, namely the reduction of company emissions.
In 2019, a United States Environmental Protection Agency report determined that industries produced 23% of greenhouse gas (GHG) emissions. RS Kaplan, the guru of ABC costing, says greenhouse gasses are at the heart of the problem and already CO2 levels in the atmosphere are 50% higher than in the pre-industrialisation era. Of the three components of ESG reporting, the environment is the most amenable to corporate reporting. Kaplan adds that companies can make a major difference to halt climate change by simply focusing on the reduction of their emissions. It is, therefore, imperative that the environmental metrics in ESG reporting are both measurable and auditable so that corporations cannot use clever window-dressing to evade their responsibility. Institutions like SAICA therefore will have a huge responsibility to help pioneer ESG standards that actually work.
The second issue is, what is the use of an environmental goal like reducing emissions if it cannot be operationalised? Firstly, a corporation must measure emissions across their entire value chain. This includes their own direct emissions, as well as the upstream and downstream emissions of suppliers and customers, including the emissions related to purchased electricity. To do this, sophisticated costing and environmental management accounting systems like ABC can be used to determine absolute CO2 emissions and eventually cost direct as well as upstream and downstream impacts on affected ecosystems.
These types of costing systems can provide measurable environment metrics that can be used by stakeholders to evaluate company performance. In parallel, companies can develop strategic plans that select what systems and equipment the company should use to minimise emissions. Improved metrics, supported by corporate action plans, can then identify specific programmes to reduce energy use and educate employees about how the value chain can be decarbonised.
In Brief
H‘You say you love your children above all else and yet you are stealing their future in front of their very eyes.’
− Greta Thunberg, climate activistSurely, the corporate world cannot disregard these words?
The accountancy profession can become a global leader to promote practical climate change.
Firstly, the accountancy profession can change the face of environmental reporting to promote corporate climate change activism.
Secondly, the profession can promote a programme called ‘accountants can save the planet’ that focuses on a simple measurable metric, namely company emissions.
Let’s get out there and challenge our members. We can do it.
