Accountants Work to Counter Climate Change | Accounting Today

Michael Cohn, Editor In Chief, Accounting Today

Accounting groups are reacting to the latest reports about the accelerated pace of climate change as global warming reaches record levels.

Against the backdrop of the United Nations’ 25th annual Conference of the Parties, or COP25, in Madrid, the International Federation of Accountants published a Point of View on climate action to highlight the role of the global accounting profession in addressing what many experts are calling a “climate emergency.”

“Ignoring the impact of climate change is not an option – nor is business as usual,” said IFAC CEO Kevin Dancey in a statement Tuesday. “As instrumental members or advisers of every government, business, and not-for-profit organization, professional accountants must influence and enable the transition to a low-carbon society.”

IFAC noted that professional accounting organizations have an influential role to play in calling for climate change mitigation and adaptation as advocates for the profession and providers of accounting training and support. They can keep accountants informed of how they can support their organizations’ and clients’ efforts to respond to climate risk. Accountants can also encourage and enable meaningful action on climate change as influential advisors in governments and organizations by providing relevant insights, analysis, reporting and assurance to help organizations create and protect value over the long-term.

The federation said it is committed to working with the global profession to build the knowledge and capacity of accountants to meet the UN’s Sustainable Development Goals and to speaking out on climate action on behalf of the accounting profession.

The Association of Chartered Certified Accountants is also calling for action, with ACCA chief executive Helen Brand joining a call to action by over 400 CEOs advocating for a sustainable Europe by 2030. They are calling on businesses, policymakers, and civil society organizations to join forces in a series of actions.

“ACCA is a longstanding promoter of taking the United Nations Sustainable Development Goals as a compass to make the transformation required towards a socially just transition to a low carbon economy,” Brand said in a statement Wednesday. “As the 17 SDGs approach their fifth-year anniversary, leaving just 10 years to achieve them by 2030, they are becoming better understood as tools for governments, business, investors and civil society to coalesce around, in order to improve how economies can deliver inclusive and sustainable prosperity. But we still have significant work to do.”

The ACCA is also endorsing the commitment to provide value to society and sustainable profitability through a strong purpose and ethical foundation of its business. “We all need to recognize the interconnectedness of social and environmental value,” said Brand. “This will require companies to embrace societal purpose and engage with context, precision, resources and determination to understand and disclose impact. Ultimately, it will be the understanding and reporting of societal impact that will radically shift capital and business ecosystems into social and environmental value creation opportunities.”

Building in resilience

Princeton University professor Dr. Michael Oppenheimer gave a presentation on climate change during a meeting Tuesday in New York of the Accountants Club of America, pointing out the trend in sea level rises across the world, and the impact on cities like New York, Miami, New Orleans and Venice.

He discussed the impact of Hurricane Sandy on the New York subway system in 2012, when several stations were flooded. “What were our leaders thinking that they didn’t really protect the subway?” he asked. “Do you know how much they did to protect the subway from saltwater flooding before Sandy? Nothing.”

Fortunately, the damage to the subways wasn’t system wide and only affected a limited number of stations, although repairs are continuing on a major subway line connecting Manhattan with Brooklyn.

Due to a string of natural disasters in recent years and the unwillingness of many property owners and local governments to move away from flood-prone areas or build sufficient barriers and protections, he noted that FEMA’s National Flood Insurance Program is effectively running out of money, and needs to come back to Congress to get further funding. He was asked about the impact of accountants’ work on groups such as the Sustainability Accounting Standards Board and the Carbon Disclosure Project, and whether they’re useful for risk management and calculating the potential effects of climate change.

“They’re useful because eventually they cause the private markets to behave in a normal way and to incorporate the risks,” he responded. “The trouble here is the federal government has taken over the private market and created an insurance system that encourages bad behavior. If there was money in the till to pay individual homeowners in advance to defend their property, which there is not, and if the insurance rates were dependent on the quality of resilience you built in, whether you raise your house or not, then it would be a system that would operate differently. The incentives would be changed, but in fact what we have now is the opposite. We are encouraging bad behavior, and if you’re a mayor and you want to do the right thing, or a governor, you know the federal government won’t shell out any money for resilience building, and you have to raise taxes effectively to do it, [and] that will cost you votes. On the other hand, your choice is to let a disaster happen, and you get to stand up on a pile of rubble with the president, who will hold your hand up and say, ‘Here’s a check for $20 billion. Fix it,’ you look like a hero. What would you do? It’s a hard-edged, cold-hearted way for me to say it, but even the most well-intended politician is still a thumb on the scale in the direction of not doing the right thing.”