How can accounting make an organisation more sustainable?
Until recently Ian Thomson was Professor of Accounting at Heriot-Watt University and Strathclyde Business School.
His research has included interdisciplinary studies on implementation of cleaner technology, establishing industrial ecologies, effective stakeholder engagement, risk governance in water and salmon farming, sustainable development indicators, government policy making and external accounting.
He has been called as an expert witness to the Scottish Parliament’s Finance and Infrastructure; Capital Investment Committees, Special Policy Advisor to the Scottish Parliament’s Transport, Infrastructure and Climate Change Committee, Budget Advisor to the Scottish Parliaments’ Cities and Infrastructure Committee, invited speaker at UN Seminar on World Food Programme, and was a member of the expert stakeholder panel for the Sustainable Development Commission (Scotland).
Accounting and Sustainability
Most people think that accounting, and calculating of costs and obsession with profit, is something which drives unsustainability. The strength of accounting, however, is making visible the financial benefits that can drive sustainability.
Bad business practices are often hidden in the financial system. Most people do not know what they are doing with their electricity and water. They are not aware if they are using the energy they buy efficiently.
From a sustainable accounting perspective, and from a circular economy point of view, waste is a purchase one cannot get a value from.
How much profit is a business making by the quantity of resources it is using?
How much profit is it making from per kilowatt of energy?
How much profit comes from per kilo of waste?
Information on these helps to link financial costs with the resources and how the organisations are using the resources.
Sustainable accounting lets us see if we are using our resources efficiently.
Future sustainable accounting will be based on wider sustainable goals, including environment and society at large. The longevity of an organisation will depend on if they are nurturing the society they serve.
Circular Economy Accounting
Currently accounting in most companies is mostly linear. If you are making money selling a product, you are making a profit. And if you have stuff that’s going to waste, that is seen as normal waste – waste that you just expect to happen.
There is no sense of responsibility for the waste, or looking at it as a form of potential value.
Conventional accounting reinforces this kind of linear thinking. With circular economy, we start looking at where the resources go.
Sustainable accounting for a circular economy keeps a track of the resources and the industry ecology.
If companies do not know how much they are wasting, they won’t know how much an activity or function is worth. Waste accounting makes things visible.
How to Do Sustainable Accounting
Ask yourself these two questions:
What is really important for the business?
What are the things it depends upon?
Then, look at the financial accounts and see if it has the relevant information to answer these questions.
Looking at the values of the organisations and accounting system and aligning the two, and putting a cost on using resources like water, electricity and waste management helps too.
Using free resources available locally also helps. Sustainable accounting can also be brought about by collaboration with universities and students and using free resources available locally.
Impact on Daily Life
Ian looks at minimizing travel wherever he can. He cycles and is an ethical consumer. He buys clothes from a New Zealand based ethical clothing company, and looks for vegetables and fruits from local sources.
Ian thinks if everybody contributes in terms of energy efficient installations at home, driving as less as possible, buying as locally as possible, it will make a difference.
Walking up the cliff of Isle of Hoy with eagles flying overhead, and wandering in the Islands of Orkney. Another place is the location in New Zealand where The Lord of The Rings Trilogy was filmed.
Ian most admires
Interface, a carpet manufacturing company for their decision to incorporate sustainability in their business.
From a sustainable accounting perspective, waste is something you bought and cannot get a value from.Ian Thomson