Right now changes are afoot in our accounting systems which will affect the future of life on earth. Guardian journalist and activist George Monbiot wrote about them recently. And environmental campaigner Tony Juniper replied to him. And I’ve been talking about them with insiders – accountants and others – over the past few months.
These changes are mostly about the way we value and account for nature – or don’t, YET. In the new accounting paradigm, which attempts to account for nature, nature is called ‘natural capital‘ and its work is called ‘ecosystem services‘. At the corporate level the new approach is called ‘integrated reporting‘.
So what is happening? And what does it all mean?
The move to integrated reporting is about that key 21st century catch all: ‘sustainability’. That is, the attempt to pursue both profits and economic growth with minimum impact on the environment and the earth’s resources. Which is, I suspect, a fundamentally oxymoronic proposition (endless growth v a finite planet). But it is something we must consider for as long as we live with an economic system which privileges profit-pursuing corporations, as we’ve done increasingly since the 19th century and especially since 1886, when corporations first acquired the legal status of people.
The challenge now is for accountants to find ways of measuring the environmental costs of business and incorporating them into management systems. Several bodies have been instrumental in this drive to integrated reporting. The Global Reporting Initiative (GRI) developed the world’s first environmental reporting framework, which was published in 2000 and most recently updated in 2011.
The International Integrated Reporting Committee (IIRC) – an initiative of the GRI and the Prince of Wales’ Accounting for Sustainability Project – was launched in August 2010 to create ‘a globally accepted framework for accounting for sustainability that brings together financial, environmental, social and governance information in a clear, concise, consistent and comparable format’.
Michael Izza, the Chief Executive of UK accounting body ICAEW and a member of the IIRC, says of the integrated reporting initiative: ‘Now appears to be a time for change, as the regulatory system is reformed and the future challenges of climate change, population growth and resource usage are better understood.’
One company actually putting some of this rhetoric into practice through integrated reporting is Impahla Clothing in Cape Town, South Africa, which supplies sports and lifestyle company Puma. According to leading UK expert on integrated reporting Dr Jeremy Osborn, Puma is at the cutting edge of integrated reporting and will be the first company to account for non-financial value quantitatively – as numbers rather than as verbal reports – integrated into its annual financial report. Puma has issued the first ever Environmental Profit and Loss Account, which puts a monetary value on the environmental impacts of sourcing, producing, marketing and distributing Puma products. Puma – and GTZ (a German organisation that promotes sustainable development) – was responsible for helping Impahla to establish its sustainability reports. Impahla’s managing director William Hughes says: ‘We are now carbon neutral and have taken out our debt to the environment.’
One Report: Integrated reporting for a sustainable strategy, by Professor Robert G. Eccles of Harvard Business School and Michael P. Krzus of Grant Thornton LLP, is a recent and comprehensive book on this new accounting paradigm. It explains why integrated reporting is necessary for ‘sustainable company strategies and a sustainable society, provides insights on how it can be done, and makes the case for it being adopted in every country in the world’.
In What’s the Economy For, Anyway? Why it’s time to stop chasing growth and start pursuing happiness John de Graaf and David K Batker question, among other things, the way we account for wealth at a national level with narrow monetary measures such as the GDP – and address the need to include natural capital in our national accounts. I met de Graaf at the 2012 Melbourne Writers’ Festival in September and discovered that moves to rethink GDP accounting – especially to account for natural capital and ecosystem services – are advancing at speed at the UN, in Europe and in Washington. I wrote about this for the Guardian this week.
These mooted – and by the look of it inevitable – changes to our accounting systems to include nature (which means calculating its monetary value in terms of natural capital and ecosystem services) are controversial. They are vehemently opposed by many, including George Monbiot and green economists such as Molly Scott Cato. As Monbiot sees it, ‘nature is being valued and commodified so that it can be exchanged for cash’. He goes on to say:
‘Commodification, economic growth, financial abstractions, corporate power: aren’t these the processes driving the world’s environmental crisis? Now we are told that to save the biosphere we need more of them.’
Tony Juniper responded to Monbiot’s opposition with the frustration of one who’s endured years of relatively fruitless campaigning for the environment and sees these moves to account for nature as having the power to make real change. He said:
‘… it seems to me there is not a choice here. I have spent the past 25 years campaigning for nature for its own sake, because it is beautiful, because it should exist for its own reasons and because we have no right to destroy it … We could carry on like this, with ideological purity preserved (on all sides), or we could open a new discourse, one that requires skeptics to meaningfully engage, and on the field where future environmental battles will be won and lost – the field of economics. After all, it is not most environmentalists who have misunderstood the realities that come with ‘growth’ on a finite Earth, but most economists.’
YES. It is (most) economists who have misunderstood the realities that come with growth on a finite Earth. Mostly by conceiving of the environment as something external to the economy, rather than understanding that the economy is embedded within the environment, as it so plainly is.
I can understand Juniper’s frustration. Especially as Monbiot can offer no alternative except more of the same, with democratic governments intervening as required – in our dreams – to curb the pursuit of profit and economic growth at the expense of the environment. (Monbiot defends his failure to offer an alternative by arguing, rightly, that he is simply a commentator). And nor can Scott Cato offer an alternative, beyond her visions for a post-capitalist – or possibly pre-capitalist medieval – economy.
But for the moment, until these post-capitalist days arrive, what forces can we invoke to stand against the encroachment of corporate capital – and its drive to commodification – into every sphere of life, including nature?
I can think of only one: the initiatives in Central America to enshrine the rights of nature in law, to give nature the legal power to contest the power of corporations. For the last 200 years, corporations – entities motivated by profit maximisation alone – have increasingly ruled the world. Corporations are now the most powerful institutions on earth. But perhaps actions such as Evo Morales’ Bolivian government’s legislation passed in January 2011 to give legal rights to ‘Mother Earth’ are the beginning of some sort of real contest between the natural world and corporations, between the Earth and the endless accumulation of capital.
Speaking in New York on 20 April 2011 at a UN General Assembly, Bolivia’s UN Ambassador Pablo Solón said: ‘Humanity finds itself at a crossroads: we can commercialise nature through the green economy or recognize the rights of nature.’ Bolivia has chosen the latter path. Solón rejects green economics because it attempts to bring the laws of capitalism to bear on nature. He also rejects technological solutions, arguing that: ‘The answer for the future lies not in scientific inventions but in our capacity to listen to nature.’
We are indeed at a crossroad. And perhaps it is time to listen to nature.