Resolving the Climate Change Accounting Predicament

by Simon Bjerkholt

Is the inconsistent and unstandardized nature of corporate environmental accounting really slowing corporations from effectively implementing climate change policy? According to a 2015 article written by Konstantinos Evangelinos et al. (2015), published in the Journal of Corporate Social Responsibility and Environmental Management, that may very well be the case. The current informal and disorganized nature of environmental accounting makes the collection and organization of important data on GHG emissions much harder and less effective than it should be. In the long term, as more and more data are collected, this could become a problem by making the corporate response to these data far less accurate and far less efficient.

In order to combat this issue, the authors of this article hope to “contribute to this debate by developing a normative framework for both assisting corporations to record information on climate change practices in a reliable way as well as to help public policy entities to receive accurate and reliable information about the results of such practices.” Evangelinos and his team propose a three step solution to this problem. Step one of their plan is to identify the driving forces that exert pressure on corporations to enact GHG strategies and create an agreed-upon set of forces that all companies use in their accounting calculations. This part of the plan would better enable policymakers to understand where the direct and indirect pressures are, to create policy more effectively. Step two of the plan is about the corporate response to these direct and indirect pressures. A more organized system of accounting would make the assessment of these corporate responses more effective and allow corporations to formulate a better understanding of how they can reduce GHG emissions while also minimizing economic losses. The final step of the plan is to take these pressures and corporate responses and attempt to convert them into financial or non-financial terms. A set of strict criteria would have to be met when converting into these terms. The financial terms would then be recorded into balance sheets with the non-financial terms collected into organized footnotes. The authors believe that this would greatly increase the efficiency and effectiveness of corporate climate change action.

Evangelinos, K., Nikolaou, I., Leal Filho, W., 2015. The effects of climate change change policy on the business community: a corporate environmental accounting perspective. Corporate Social Responsibility and Environmental Management, 257-270.

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