© Stewart McKie - 1 - 8/12/093D Accounting: An Introduction to Green Accounting© Stewart McKie, 2009There was a time, many decades ago, when all a CFO had to care about was the ‘F’word: Finance. But today’s chief financial officer has to care about more than justfinance. The new ‘triple bottom line’, a term originally coined by John Elkington in1994, implies that the financial management of the business has to go hand in handwith environmental and social impact accounting.Here, I refer to this kind of organizational management as three-dimensionalaccounting or ‘3DA’. What can I tell you: I’m a technology guy, I love acronyms.Yes, I know ‘three dimensional’ has baggage: cardboard spectacles, the spooky thirddimension and 3D graphics. But I prefer it to ‘triple bottom line’ because it seemsmore holistic, ‘bottom line’ has too much of profit and loss feel about it and 3BL is pronounced ‘thribble’.Because 3DA is not just about money. 3DA is concerned about different businessoutcomes: Impact and footprint rather than just profit and loss. 3DA has a differentaudience: Organizational stakeholders generally rather than equity shareholdersspecifically. 3DA reflects a different kind of operational transparency that isconcerned with people and the planet and not just profit.We should all care about the social and environmental impact of a business,especially global businesses, as in the end their impact can have far reachingconsequences that are not easy to predict – even the recent financial crisis might have been mitigated by better social accounting. Today, more and more people will havequalms about working for your company or buying your products if your social andenvironmental practices are not accurate and transparent, so 3DA contributes to brandimage. And steadily increasing environmental regulation means that most businesseswill be forced to pay at least some attention to 3DA simply to comply withlegislation. If you think Sarbanes-Oxley or reporting to the SEC in XBRL was a burden on your business shoulders, then take my advice: Start bulking up now.
The 3Ds are the financial, social and environmental dimensions of your business.Here, I’ll introduce the social and environmental dimensions and focus on anenvironmental accounting example. I won’t spend any time on the finance dimension.The last dramatic change to finance was when Luca Pacioli documented double entry bookkeeping in the 15
century. Since then business management has been stuck in aone–dimensional groove.The social dimension is people focused, whereas the environmental dimension isresource focused. By people I mean both people who work for and with a business,the people who buy and use products or consume services and the people whosurround businesses in the communities where the business is located or operates in.By resources I mean the operational resources of the business (typically comprisingits fixed assets) and the resources the business consumes or generates as a result of itsoperations (i.e. its business processes). Note that both people and resources are anintegral part of business processes, so the social and environmental impact of a business process is also a legitimate area of attention.