A brief (but incomplete) overview of current attempts to account for sustainability : guest post 2 by Dr Stephen Jollands
Guest post #2 by Dr Stephen Jollands
In the previous post I defined sustainability as humanity not over-consuming the resources available to them and thereby irreversibly depleting the levels of natural capital while at the same time ensuring an equitable and fair distribution, both within the current generation as well as across all future generations, of the resources available. The aim of this post is to review some of the tools that claim to account for sustainability and question how well they stack up against this definition.
The obvious place to start is with the very tool we utilised to help explain sustainability, the ecological footprint. This calculates the biologically productive surface area required to sustain the thing of interest; whether that is the Earth, a specific country, an organisation, or even a specific project. Thus this tool is a very effective indicator of resource throughput. Despite being a very effective tool and adhering to a strong conception of sustainability it also has inherent weaknesses. Primarily amongst these is that it gives no indication over the health of the specific part of the ecosphere that the resources are being drawn from or the waste assimilated to. Therefore, it would appear that its effectiveness would be improved if set within a system of supporting sustainability focused management controls. We shall now turn to examining a few of these potential candidates.
The most obvious to examine next is the various types of external reporting that organisations do under the label of sustainability. There have been many differing frameworks developed in this respect including The Prince’s Accounting for Sustainability Project, the GRI and Integrated Reporting. These provide useful tools for businesses to organise their communications with their shareholders in regards to their social and environmental impacts. But this is also the source of critique for them as well. That is we have to question how far beyond public relations these reports go. The proponents of the various framework argue that the use of their frameworks provide stakeholders with an in depth analysis of the social and environmental impacts of an organisation. However, we need to question whether any rationale executive would allow the more controversial elements of their operations to be released in a public environment. When we reflect on the various accounting standards inability to provide clarity over economic affairs, as is evidenced by continual scandals, it is hardly surprising that these frameworks will probably fare no better. Further, none of these frameworks requires the organisation to report on the scale or scope of resources drawn from the ecosphere or waste assimilated back into it (i.e. an ecological footprint), which, as was explained last week, is at the heart of the issue of sustainability. This is not surprising as the accounting entity convention sets precise limits as to what is accounted for. For this very reason many commentators have expressed the view that the focus of the going concern concept should be elements of the ecosphere; such as rivers and forests; rather than the economic entity. If this was the case then economic organisations would be required to account for how they have helped maintained these ecosphere going concerns and in doing so been allowed to generate a profit.
The final example, although there is so many others we could review, which I will cover will be attempts to provide a cost to the social and environmental impacts of an organisation. The reason for selecting this as the final example is that Puma generated a large amount of publicity recently through publishing their first Environmental Profit and Loss account. Puma reports that their environmental impact for the key areas of greenhouse gas emissions, water use, land use, air pollution and waste, generated through their operations and supply chain is valued at €145 million in 2010. In the same year Puma reported that their Net Earnings were €202.2 million. This raises the question as to whether, given their Net Earnings were greater than their environmental impacts, they are therefore a truly sustainable organisation? The possibility of one of the world’s most notable examples of a consumerism driven, profit increasing through growth in sales organisations being sustainable seems to fly in the face of the evidence provided by the ecological footprint of our current over consumption of natural capital. This contradiction could be better explored had Puma provided more in depth details surrounding their calculations. However, given the involvement of consultants in this calculation, these details are unlikely to be ever released. The final question to ask is what concrete actions will this calculation result in?
In closing this quick overview, I would also question why Puma chose to put itself in a position for stakeholders to believe that it was the first organisation to provide an environmental profit and loss account when so many other notable and more transparent examples and experiments have occurred before? Or indeed we could question why Puma did not utilise one of these other tools given they are existing technologies and these tools have a close relationship with strong conceptions of sustainability? One notable example is full cost accounting (FCA). FCA as a concept integrates all potential costs and benefits, including those that relate to social and environmental, that organisations would normally consider as externalities, into the economic calculations they perform. The aim, therefore, is to ensure that a full set of broad considerations are taken into account during the decision making process. Of course here the emphasis is on decision making rather than releasing information publically and hence when this tool is used it generally does not make levels of publicity anywhere near those generated by Puma. Related to this is the sustainability assessment model (SAM), which is a tool developed in order to assist with the implementation of FCA. It is interesting that a colleague of mine focused his PhD research on assisting two local government bodies in implementing the use of SAM. While one of these were genuinely amazed at the extent of their impact and proceeded to take action accordingly, the other asked my colleague to leave when the SAM failed to deliver the “right” answer. That is when it provided visibility over the high levels of un-sustainability this plainly was unsettling to the managers involved. It is often understood by researchers in the area of accounting for sustainability that if the results do not make you feel incredibly uncomfortable you’re plainly not doing it right. Thus it is with interest that I introduce the last tool, the sustainable cost calculation (SCC). SCC is a way to measures how much it would cost an organisation to ensure that its operations left Earth at least no worse off at the end of the accounting period. The idea here is precisely to utilise the language of accounting to provide visibility over the true impacts of an organisation on natural capital and thereby the gapping chasm between our current operations and those that would be sustainable. It is interesting that the experiments with this tool have, beyond showing the un-sustainability of the organisations involved, highlighted how difficult it is to perform these calculations given the complexities and our relative dearth of knowledge as to how our ecosphere works.
The point I am trying to highlight in this post is that it is hard to be anything but cynical of many of the current attempts to account for sustainability as they do not link to the underlying issues and appear to be nothing more than attempts to generate publicity for the organisations involved.
These issues, covered in these two posts, around accounting and sustainability is the focus of my research and teaching efforts:
I would therefore encourage anyone interested in furthering their knowledge in the area of sustainability and business to consider undertaking the innovative One Planet MBA, which I teach the accounting module in: