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Urgent climate update: Accountants gear for action

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Accounting may not spring to mind when alarming climate change reports call for action, but experts believe accountants have a key role in helping businesses evolve in a manner that can save the planet from the deadliest effects of over-heating.

12th Aug 2021
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The planet is going to get hotter, humans are to blame and everyone must do better, a sobering new report from the UN’s climate change arm has warned. 

Efforts by businesses to limit or neutralise carbon emissions along with other sustainability drives have done little to stem rising sea levels, droughts, melting ice caps and extreme temperatures, all of which are now irreversible, researchers found.

The brutal report, laid out by the Intergovernmental Panel on Climate Change (IPCC), an organisation of 195 governments, was the result of a three-year analysis of 14,000 peer-reviewed scientific studies, signed off by 234 scientists from more than 60 countries.

“It is unequivocal that human influence has warmed the atmosphere, ocean and land,” the IPCC said in its top line. “Human-induced climate change is already affecting many weather and climate extremes in every region across the globe.”

The ‘Code Red’ findings made headlines around the world as wildfires rage in Greece, California and Siberia, and preceded a week of record-high European and Middle Eastern temperatures, underlining concerns that a tipping point in many aspects has long passed.

According to the report, immediate, large-scale action can help humanity avoid the worst-case scenario but time is running out.

Rearranging deckchairs

“The IPCC report isn’t scaremongering, it’s a brutally honest look at what humanity will be facing in just a few short years if we carry on as we are,” said sustainability advisor Neil Gaught, of organisational management experts Single Organising Idea. “Currently, we’re messing about on the sidelines, we’re moving around deckchairs on the Titanic. It’s no good having companies lobbying for one thing to achieve a status quo whilst at the same time the world is looking down the barrel of disaster.”

Putting sustainability at the heart of business is crucial, and the necessary tools are there if businesses pay more attention, Gaught said. 

“It is undeniable that things are changing for the worse,” he said. “But it’s not just about the climate, it’s about society and its reaction to the climate. It’s also about what’s going on in the economy. None of it is sustainable.”

International climate negotiations are scheduled for November, and it is likely the outcomes of that will filter down from world leaders to businesses via regulators, as they did in 2014 when the previous IPCC report fed into the Paris Accord. The release is the first of four IPCC reports over the next 15 months, all of which are likely to ring major changes in business and geopolitics. 

Evolving disclosure requirements

Robust disclosures of climate risks associated with businesses, including emissions, and how to ensure firms comply, will be top of regulatory thinking. 

Climate matters will have a major impact on a company’s financial reports, and it is vital that disclosures are laid in front of auditors so they can review whether the statements are missing key information about the harm a firm does to the environment, experts believe.

“Given that we live in a market economy, in which most believe the most effective communication mechanism for societal preferences that we have, I persist in the view that putting climate change on the balance sheet of companies is the best thing that we can do,” said Richard Murphy, accounting professor and tax expert. “I describe this as sustainable cost accounting.”

When a decision with an unavoidable cost such as shutting a production line is made, a company through its accounts has to provide for that cost when the decision is taken, Murphy said. “Companies have to decide to close their emission production activities now. If they don’t this planet cannot continue to function as we want. It is as simple as that, so the provision for the cost of stopping emissions has to be made, now.”

Last year, the Financial Reporting Council reviewed climate-related issues and found auditors “need to improve their consideration of climate-related risks when planning and

executing their audits”. It said consideration and disclosure of climate change in the financial statements lags behind narrative reporting, hinting that further regulation in this area is almost certain.

Hope for the future

While many commentators on the PICC report extracted doom-and-gloom, dystopian conclusions that humans are living in a disaster movie, there is cause for hope amongst the accounting profession that it holds the keys to building a more sustainable future for our economies.

Certified B Corporations are firms that meet the highest standards of verified social and environmental performance, public transparency, and legal accountability to balance profit and purpose. Verification is via B Lab, a global non-profit organisation.

Several UK accountancies are becoming accredited with the private certification that is obtained via a rigorous assessment of a company’s impact on its workers, customers, community, and environment. Certified B Corps amend their legal governing documents to require their board of directors to balance profit and purpose.

“We made the decision to become a Certified B Corp at the beginning of 2021,” said Matt Portt of Portt & Co. “It felt like the natural progression to support our aim of creating a better future, not just for businesses, but for our employees and their families. “

The framework allows the firm to select best practices in a way that fits its size and business model, Portt said. “Aside from our personal values, we also think it makes business sense to achieve a recognised environmental and social certification like B Corp.” 

His firm specialises in the food and drink sector, where sustainable brands are making inroads. Many brands initially focused on internal operations are turning to their supplier base to ensure they are sustainable. “We, therefore, believe that there will be a trickle-down effect to all areas of business including the accountancy profession,” Portt told AccountingWEB. 

Portt & Co. moved to a paperless office and introduced remote working to offset carbon emissions. 

Small steps, big difference

Yogesh Patel founder of tax-focussed accountancy Telic told AccountingWEB his firm is also in the process of becoming a B Corp, which means structural changes to how it conducts its business.

While Covid-19 is still top of the agenda for many clients, climate change is down the priority list, Patel said, but he is hopeful that the message is getting through and expects to see a change in time. 

“UN Sustainable goals should be more widely known and talked about and business/entrepreneurship should be focussed on these areas,” he said. “Which I can see is clearly happening with the increased volume of impact investment by High Net Worth individuals.”

Ultimately, taking small steps within the firm can make a big difference and can impact client thinking, Patel and Portt agreed.

“In our experience, once you start the passion grows stronger; it’s been encouraging to see how much our team have embraced this and made changes in their personal lives as a result,” Portt added. “More and more businesses are adopting this approach and we feel it will soon be part of the decision-making process when it comes to choosing a firm.

Replies (28)

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By Justin Bryant
12th Aug 2021 14:05

Most people here (excluding me), like most others, don't seem to give a monkey's and at most pay lip service to all this. See for example here those disagreeing with me re simple fuel efficiency and fuel taxes: https://www.accountingweb.co.uk/any-answers/potential-fuel-duty-increase

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Replying to Justin Bryant:
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By Justin Bryant
12th Aug 2021 14:51

NB legislation changes in April 2020 means salary sacrifice became the cheapest way to source an Electric Car (EV). Usually you can sacrifice up to 25% of gross salary in return for a fully maintained, taxed and insured company car, with breakdown cover.

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By Hugo Fair
12th Aug 2021 17:38

I tend to stop listening properly when I encounter quotes from "organisational management experts" and other such useful members of society ... especially as they all proceed to grind the axes they've brought to the discussion!
Climate change (and more importantly ecological destruction) are absolutely real and pose major threats ... but there are an almost infinite number of better opportunities to do something about this before you turn to the blandishments of those selling Certified B Corp frameworks/tick-boxes.

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By Paul Crowley
12th Aug 2021 18:36

I thought Greta had sorted this out by making children believe the world will end in allconsuming fire within 10 years
Time for Greta to start flying all over the world again, except India and China off course.
I stopped driving and do not have a dog
Does that help?

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Replying to Paul Crowley:
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By Richard Grant
13th Aug 2021 11:03

Don't worry she will be flying in to Glasgow in October with about 10,000 other climate disciples to preach to us.

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By Springfield
13th Aug 2021 10:12

I guess I'm in a minority that thinks we are now, officially, bonkers.

If auditors still can't spot hard cash being syphoned out of businesses or the existence of fake invoices or dummy bank accounts, how are they going to track the potential movement of hot air?

Rising sea levels? 3.6mm per year on average according to the Royal Society. The sea has risen 6 inches since 1902. Which is why when you re-visit the beaches of your childhood, they don't look any different.

London and the East coast had huge floods in 1928 and 1952, well before "climate change' was ever thought of. In the 17th & 18th centuries London had frost fairs where you could walk across the Thames when it regularly froze over. The "Little Ice Age" it was called - who caused that"

Yes - stop harmful diesel and other emissions which damage air quality, and stop chucking rubbish and pollutants in the seas and oceans.

But, as far as the climate change lobby is concerned - ask yourself, who benefits?

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Replying to Springfield:
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By Michael C Feltham
13th Aug 2021 11:22

Fat Al (Gore) benefited for one!

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Replying to Michael C Feltham:
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By Springfield
13th Aug 2021 11:39

Al forecast in 2008 that the Artic could be "Ice Free" by 2014.

The Guardian in 2002 quoted a "secret report from the Pentagon that Britain will be Siberia by 2020".

These people have no shame - like end-of-worlders - they just push the date back a few years.

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Replying to Springfield:
By Nick Graves
13th Aug 2021 12:09

Soo, it'd now be down to auditors to put all these well-known climate fraudsters in jail..?

Gawd 'elp us...

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By Michael C Feltham
13th Aug 2021 10:35

" but experts believe "...
As soon as I read the word "Expert", I become internally overheated!
My own definition of an expert is a combination of a has been and a drip.
One of the main causes for the devastating forest fires has been lack of proper arboreal management, lack of proper fire breaks and excessive development in high risk areas.
However, to the climate change loonies, these fires have been a gift from god.

The West, driven by the IPCC, is in process of emasculating itself, destroying any remaining industrial base, impoverishing a majority and destroying society; whilst China, India, Brazil are rapidly increasing their carbon footprint: China particularly, as it builds new coal fired power generation facilities at an increasing rate.

And now some flake reckons accountants can join in saving the planet! Whilst, simultaneously, dealing with the accelerated roll out of full MTD, abolition of basis periods and etc.

A good place to start to understand reality on all this nonsense is to read the late Christopher Booker's work, "The Real Global Warming Disaster".
Then progress to Patrick J Michaels and Robert C Balling Jr,'s "Climate of Extremes".

Personally, I believe atmospheric low-level air pollution is a far greater threat to human health, at present.

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Replying to Michael C Feltham:
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By Richard Grant
13th Aug 2021 11:05

Thank you, a breath of fresh air.

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Replying to Michael C Feltham:
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By Open all hours
14th Aug 2021 14:46

I was always told that an ‘Ex’ is a has been and a ‘Spert’ is a drip under pressure.

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By unclejoe
13th Aug 2021 10:41

The stated aim of B-Corp is to use business to achieve the change they wish to see in the world. So it seems to me that in signing up to B-Corp a company is agreeing to sign up to whatever the woke idealogy of B-Corp is. For me, as a consumer it makes no difference whether a company is signed up or not. There are companies that I chose not to patronise because I disagree with their stated philosophy or practices. As an investor a company getting B-Corp certification is probably a negative factor. I want to invest in companies with management with brains that don't need to waste the company resources on consultants to tell them, how to be ethical.

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By johnt27
13th Aug 2021 10:43

There's no point in identifying an audit risk if you can't quantify or qualify the potential impact. With a lack of frameworks available to determine the climate impact on a business or vice versa it's extremely difficult to approach this with any level of consistency. Yes, we have SECR reporting for the largest businesses but this only touches on energy usage and now the government are expecting SMEs to measure their environmental impact, so just as we have agreed upon accounting standards the same is required in this space too

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By Open all hours
13th Aug 2021 13:16

In order to guarantee visits to remote farming clients I will continue to drive a 4x4.
Friend who is an NFU rep. with a hybrid Volvo said she loved the tax saving but believes the eco tag is fraudulent. Totally impractical for every day rural use.

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JD Portrait
By John Downes
13th Aug 2021 14:33

There is science, there is junk science, and there is climate change alarmism.
An entire industry, exemplified by those advertised in the above article, has grown up exploiting the fear of the gullible. Wasps gathering around the honey pot.
This nonsense was exposed as the scam it is when the climategate emails were leaked back in 2009.
As Sam Goldwyn used to say, include me out.

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By killer33
13th Aug 2021 15:16

This article has generated the usual cynical responses from the climate science deniers.

The leading article in todays Times is entirely correct. We can carry on as normal and leave future generations with a terrible legacy or all countries can act swiftly to limit the damage. The latter option is also the least expensive.

I'm not a fan of these virtue signalling certificates though .

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Replying to killer33:
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By Hugo Fair
13th Aug 2021 15:21

And your last sentence (with which I agree) reflects what has riled most readers of the article ... which is a hybrid of virtue-signalling and an opportunistic attempt at a cash grab.

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Replying to Hugo Fair:
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By killer33
13th Aug 2021 15:23

Spot on.

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Replying to killer33:
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By Michael C Feltham
13th Aug 2021 17:41

"This article has generated the usual cynical responses from the climate science deniers. ".
I would dispute your disparaging opening statement.

Titling those who do not agree with a posit, by the glib label "Deniers" has been the very method used by politicians and those trying to sell a specious cause.

Trying to promote the fallacious idea of the hugely dubious theory of anthropogenic climate change, particularly regarding Carbon, promoted by self-titled "Climate Scientists", has created a nice little earner: and we are paying for it and will pay more, holistically, the longer the scam is allowed to enjoy a continuum.

Please consider the following:
"Future generations will wonder in bemused amazement that the early 21st century's developed World went into hysterical panic over a globally averaged temperature increase of a few tenths of a degree and, on the basis of gross exaggerations of highly uncertain computer projections combined into implausible chains of inference, proceeded to contemplate a roll-back of the industrial age."

Professor Richard Lindzen, the World's leading atmospheric physicist and Climate Change scientist, 2007.

Personally, I respect Prof. Lindzen's conclusion, rather than a bunch of self-promoting wannabe "Scientists" at Anglia supposed university!

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Replying to Michael C Feltham:
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By Hugo Fair
13th Aug 2021 18:32

Personally, I've no idea who's telling the truth (or more likely to where the mix of information and disinformation points us) ...
but "Professor Richard Lindzen, the World's leading atmospheric physicist and Climate Change scientist"?

He may have been one of the World's leading atmospheric physicists prior to his retirement nearly 10 years ago (although 'leading' is an unquantifiable assertion) - but he has never been one of the World's leading Climate Change scientists (as he would be the first to admit given his view that Climate Change scientists are universally frauds)!

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Replying to Hugo Fair:
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By Michael C Feltham
14th Aug 2021 11:03

"Personally, I've no idea who's telling the truth (or more likely to where the mix of information and disinformation points us) ..."

In which case, don't you think it is high time you carried out some research, in order to reach a Value Judgement and conclusion, then?

Or are you happy to be led by the nose by idiot politicians and the WEF deciding your and your children's futures, relative to such dangerous concepts as the Great Reset?

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Replying to Michael C Feltham:
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By Paul Crowley
14th Aug 2021 15:25

State of Fear is worth a read
Climate mentioned but the politics ring true
Not popular with anyone who supports the 'science'
But a best seller
People voting with their $

Does Humanity think it is so special that a Planet can be damaged by farting cows
and 4X4s

Based on Aweb views on woke activism
This may well once again be my last post

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Replying to Paul Crowley:
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By Michael C Feltham
14th Aug 2021 20:33

Paul Crowley wrote:

State of Fear is worth a read
Climate mentioned but the politics ring true
Not popular with anyone who supports the 'science'
But a best seller
People voting with their $

Does Humanity think it is so special that a Planet can be damaged by farting cows
and 4X4s

Paul: State of Fear is a tremendous novel: I am a great fan of the late great Michael Crichton. I have recommended this book to many, not the least reason being the wealth of factual references.

Surreally, Crichton's concept of a very well paid man, who continues to push his highly flawed climate concepts, actually parallels the man who who was the original head of the UN-inspired IPCC: and what is so fascinating about the IPCC is that the man driving this joke, was not ever a scientist!

What he was was an opportunist...

Based on Aweb views on woke activism
This may well once again be my last post

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Replying to Michael C Feltham:
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By Justin Bryant
17th Aug 2021 11:53

The author of that book basically admits he knows nothing about science (physics) in explaining the gell-mann amnesia effect. See:

https://en.wikipedia.org/wiki/Michael_Crichton

See also this brazen admission of unjustified spin:

"I refer to it by this name because I once discussed it with Murray Gell-Mann, and by dropping a famous name I imply greater importance to myself, and to the effect, than it would otherwise have."

https://www.johndcook.com/blog/2021/01/18/gell-mann-amnesia/

What a bunch of knuckle-draggers most Awebers are to believe such a person. They will be quoting David Icke next in support of their bonehead views!

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Replying to Michael C Feltham:
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By Paul Crowley
14th Aug 2021 15:32

Science based on prediction is really just opinion not proven fact
Planets change temperatures on on their own, or were the dinosaur farts the reason for ice ages or the stopping of ice ages

There is no reliable science on this stuff
Scientists with non agenda opinions get no research funding and become tax advisors, because tax is real and matters to all citizens with no woke agendas

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By indomitable
15th Aug 2021 14:20

"but experts believe accountants have a key role in helping businesses evolve in a manner that can save the planet from the deadliest effects of over-heating"

I didn't read any further!

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By AndrewV12
16th Aug 2021 11:40

“UN Sustainable goals should be more widely known and talked about and business/entrepreneurship should be focussed on these areas,” he said. “Which I can see is clearly happening with the increased volume of impact investment by High Net Worth individuals.”

Good point well made, Accountants are certainly asked to perform a variety of roles theses days.

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