Can Accountants save the world

“Accountants are going to save the world!” This was the bold claim of Peter Bakker of the World Business Council for Sustainable Development at a conference on Green Growth in Paris last week.

Is this the cry of a profession that just wants to break free from the prosaic task of bean-counting? Was I the only one in the audience for whom a sketch from Monty Python sprang to mind?

The polemical remark did however raise the issue of who was best placed to come up with the goods to stop climate change. Should we measure carbon emissions in supply chains (through Mr Bakker’s army of accountants) or simply price carbon (as economists would argue) so that incentives are automatically set for decarbonizing economic growth? The answer lies somewhere in the middle.

Bean counters
Will accountants save the world?
Image: Blue Yonder, flickr 

Drivers of greening supply chains
Companies are driven to green their supply chains by three forces. During the conference, Michael Toffel from the Harvard Business School presented results of a survey that showed that firms are motivated to ‘go green’ by:

  • Pressure from activist shareholders
  • Threat of regulation of greenhouse gas emissions
  • Buyer demands for lower emissions

Antoine Dechezlepretre from the London School of Economics elaborated on how government intervention (e.g. emissions trading schemes) changes firm behaviour. His research showed that government pricing of carbon boosted innovation to reduce emissions. Domestic green policies also induced green innovation abroad as international suppliers respond to new requirements to maintain their market share.

One expert also spoke about how a carbon tax introduced in British Columbia, Canada had reduced the intensity of carbon use in the province by 30%.

However, policy asymmetries between countries can offset part of these benefits. Mr Dechezlepretre’s research also detected a “carbon leakage” effect whereby a 10% increase in energy prices due to regulation leads to a 1% increase in energy imports from the country with lower (unregulated) energy costs.

So in summary, a strong case for the effectiveness of governments in decarbonized economic growth was made. What about the case for measurement as a policy tool for reducing emissions?

Why corporations report on environment

Proctor and Gamble said that reporting on the environment was expensive but that it was worth their while because it helped them to “build value”. By this they meant strengthening the sustainability of supply and improving employee relations and public image. Nancy Kemp Roelands of Ernest and Young said that there was a business case in reporting in terms of improving communication and building business ethics.

More balanced discussion needed

The key weakness in the reporting approach lay in the fact that most global economic activity takes place through SMEs. Relying on reporting initiatives would overlook the majority of emissions as SMEs do not have the resources to implement such schemes. This is the case particularly for developing countries. The conference would have benefited from participation by NGOs and developing country suppliers in this regard.

Further, the rapid proliferation of private reporting schemes is seen in some quarters as “greenwash”,

Carbon pricing or bean counting – the verdict

In the end, the question of who will save the world was pithily answered by Paul Dickinson of the Carbon Disclosure Project (an organization that measures corporations’ carbon footprints)

“If we had carbon pricing, then green accounting would take care of itself”.

Whilst economists in the room may have breathed a sigh of relief, there was also a consensus that measurement approaches enabled consumers to make more sustainable decisions. It has to be hoped that this provision of information will inform governments on where and how to price carbon. Indeed, Mr Bakker’s accountants would then have helped save the world.

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