Financial Accounting and Sustainability

Lecture 12

LOOKING BACK: ENVIRONMENTAL PROVISIONS

A company must recognize an environmental liability when it has an existing legal obligation associated with the
retirement of a long-lived asset and when it can reasonably estimate the amount of the liability.
Obligating Events. Examples of existing legal obligations, which require recognition of a
liability include, but are not limited to:
§ Decommissioning nuclear facilities,
§ Dismantling, restoring, and reclamation of oil and gas properties,
§ Certain closure, reclamation, and removal costs of mining facilities,
§ Closure and post-closure costs of landfills.

FAR aims to train student as academic professionals in financial accounting and reporting. At the end of this course,
the students should be able to:
1. Argue in line with the Accounting+ idea, and the overall Economics+ orientation of the program, and thus…
2. Define the key concepts ‘Accounting’, ‘Financial Reporting’ and ‘Non-financial Reporting’, and explain how
they are interrelated in real-world economic problems;.
WHAT IS THE MEANING OF “SUSTAINABILITY”?
“Sustainable development is development that …
… meets the needs of the present …
“overring a”
for needs of the poor
... without compromising the ability of future generations to meet their own needs.”

WHAT IS SUSTAINABILITY REPORTING?

“Sustainability reporting is a term commonly used to
describe a range of
practices where organisations provide information on
sustainability matters”.
(p. 83)
“Sustainability reporting provides and substantiates
information about the status and progress of corporate
sustainability towards internal and external stakeholders through formalized means of communication”. (p. 165)
REPORTING ABOUT SUSTAINABILITY ISSUES
Sustainability reporting comes in many different forms!
Sustainability reporting today is a “mainstream” practice!
GROWTH IN SUSTAINABILITY REPORTING
Legend:
N100 = refers to a worldwide sample of 4,900 companies
comprising the top 100 companies by revenue in each of the
49 countries researched in this study
G250 = refers to the world’s 250 largest companies by
revenue based on the Fortune 500 ranking.

WHAT

SUSTAINABILITY INFORMATION DO FIRMS NEED TO

REPORT?
A STEP TOWARDS MANDATORY REPORTING
à Mandatory character for large public companies
headquartered in the EU
 • Little guidance on specifically
what and how to report.
• Potential for discretion (i.e. report what and how companies think is best for them)

WHAT SUSTAINABILITY INFORMATION DO FIRMS NEED TO REPORT?

HOW TO REPORT? - THE GLOBAL REPORTING INITIATIVE (GRI)

• The GRI is an international independent organization, with a network-based structure.
• It includes representation from corporations, governments, non-governmental organizations, consultancies,
accountancy organizations, business associations, rating agencies, universities, and research institutes.
• The GRI produce the world‘s most widely used standards for sustainability reporting, the GRI guidelines,
which enable organizations to measure and understand their most critical impacts on the environment,
society and the economy.
GRI STANDARDS

GLOSSARY OF INSTITUTIONS (MENTIONED)

• CDP: The CDP (formerly the Carbon Disclosure Project) is a not-for-profit charity that runs the global
disclosure
system for investors, companies, cities, states and regions to manage their environmental impacts.
• GRI: The Global Reporting Initiative is an international independent standards organization that helps
businesses, governments and other organizations understand and communicate their impacts on issues such
as climate change, human rights and corruption.
• Integrated Reporting IR: The International Integrated Reporting Framework published by the International
Integrated Reporting Council IIRC is used to accelerate the adoption of integrated reporting across the world.
• PRI: Principles for Responsible Investment is a United Nations-supported international network of investors
working together to implement its six aspirational principles, often referenced as "the Principles”, that offer a
menu of possible actions for incorporating ESG issues into investment practice.
• SASB: SASB Standards guide the disclosure of financially material sustainability information by companies to
their investors. Available for 77 industries, the Standards identify the subset of environmental, social, and
governance (ESG) issues most relevant to financial performance in each industry.
• TCFD: The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to
improve and increase reporting of climate-related financial information.
• UN Global Compact: The United Nations Global Compact is a non-binding United Nations pact to encourage
businesses and firms worldwide to adopt sustainable and socially responsible policies, and to report on their
implementation.