Part 1: Introduction to Sustainability Accounting

 Introduction
Sustainability accounting encompasses the integration of an organization’s social,
environmental, and economic dimensions within its accounting practices(Lamberton,
2005; Schaltegger and Burritt, 2006b; Thomson, 2007). It represents a branch of
accounting that emphasizes the disclosure of non-financial information pertaining to
environmental, social, and governance (ESG) matters, thereby prompting organizations to
address these facets alongside traditional financial reporting Ozili, P.K. (2022).

 Principles
- Integrated reporting
Integrated reporting is to combined both financial and other as well as the
explanation of financial capital to providers. An integrated report benefits all
stakeholders interested in an organisation’s ability to create value over time
(Deloitte, 2024). {Deloitte. (2024). Integrated Reporting Framework.
https://www.iasplus.com/en/resources/sustainability/iirc#:~:text=The%20primary
%20purpose%20of%20an,information%2C%20both%20financial%20and
%20other. ) Integrated reporting is an integral component of a continually
evolving corporate reporting system, facilitated by comprehensive frameworks
and standards that encompass measurement and disclosure across all capitals,
alongside appropriate regulation and effective assurance mechanisms. While
integrated reporting aligns with advancements in financial and other reporting
practices, it also diverges from traditional reports and communications in several
key aspects. Specifically, it centers on an organization’s capacity to generate value
over the short, medium, and long term, underscored by a collective emphasis on
brevity, strategic alignment, and forward-looking perspectives. Moreover,
integrated reporting highlights the interconnectedness of information and the
various capitals, emphasizing their interdependencies. It also underscores the
significance of integrated thinking within the organization as a fundamental driver
of sustainable value creation (IFRS, 2021, pg 4). IFRS. (2021).
INTERNATIONAL <IR> FRAMEWORK. pg4.

- Carbon accounting
Carbon accounting, akin to financial accounting, involves the systematic tallying,
inventorying, tracking, and disclosure of an organization's greenhouse gas (GHG)
emissions, commonly referred to as its carbon footprint. This process
encompasses the quantification of emissions, primarily using carbon dioxide
(CO2) as the established global accounting unit, along with other emissions like
methane converted into carbon and expressed as "carbon equivalents" (CO2e or
CO2eq). Similar to financial accounting, where income and expenses are
 compiled into a budget, carbon accounting operates by aggregating an
organization's emissions into its carbon inventory. This inventory serves as the
basis for identifying opportunities to reduce emissions, as well as for accounting
for carbon improvements or offsets.

Common practice in carbon accounting is categorizing CO2 as Scope 1, Scope 2,

or Scope 3 GHG.

Scope 1: release directly from sources that owned or controlled by an

organization.
Scope 2: release from the electricity, steam, heating and cooling purchased by an
organization.
Scope 3: indirect greenhouse gas emissions that occur as a consequence of the
activities of a facility, but from sources not owned or controlled by that facility’s
business.

- Impact (Sustainability reporting on financial performance)

Sustainability accounting is a field that focuses on integrating environmental, social, and

economic considerations into financial reporting and decision-making processes. It goes beyond
traditional financial accounting by providing stakeholders with comprehensive information about
an organization's sustainability performance and its impact on society and the environment.
可持续发展会计是一个专注于将环境、社会和经济因素纳入财务报告和决策过程的领域。
它超越了传统的财务会计，为利益相关者提供有关组织可持续发展绩效及其对社会和环境
影响的全面信息。
Sustainable finance is a rapidly growing field that aims to align financial decision-making with
environmental and social sustainability goals. This includes investing in companies and projects
that have a positive environmental and social impact, as well as incorporating environmental,
social, and governance (ESG) criteria into financial analysis and decision-making.
https://www.coolset.com/academy/sustainable-finance-the-role-of-carbon-accounting
Sustainability accounting entails systems, methods, and processes of creating sustainability
information for transparency, accountability, and decision making purposes.
可持续发展会计需要为透明度、问责制和决策目的而创建可持续发展信息的系统、方法和
流程。
https://link.springer.com/referenceworkentry/10.1007/978-3-642-28036-
8_743#:~:text=Definition,accountability%2C%20and%20decision%20making%20purposes.
Sustainability accounting is the practice of measuring, analyzing and reporting a company’s
social and environmental impacts.

可持续发展会计是衡量、分析和报告公司社会和环境影响的实践。

https://sprott.carleton.ca/2021/02/what-is-sustainability-accounting-what-
does-esg-mean-we-have-answers/
sustainability accounting is defined as accounting that integrates
social, environmental and economic facets of organization’s activities
(Lamberton, 2005; Schaltegger and Burritt, 2006b; Thomson, 2007).
Lamberton, G. (2005). Sustainability accounting—A brief history and
conceptual framework. Accounting Forum, 29(1), 7-26.
Sustainability accounting is considered to be the branch of accounting that
require organizations to pay attention to environmental, social and governance
matters by disclosing non-financial information about the organization (Ozili,
2022)
Ozili, P.K. (2022). Sustainability Accounting.
https://www.researchgate.net/publication/350217973_Sustainability_Accounting.
Integrated reporting combines financial and non-financial information in a single report to
provide a holistic view of an organization's performance. It emphasizes the interconnectedness
between financial capital, natural capital, social capital, and human capital.

综合报告将财务和非财务信息合并在一份报告中，以提供组织绩效的整体视图。 它强调
金融资本、自然资本、社会资本和人力资本之间的相互联系。

A concise communication about how an organization's strategy, governance, performance and

prospects, in the context of its external environment, lead to the creation, preservation or erosion
of value in the short, medium and long term.
关于组织的战略、治理、绩效和前景如何在其外部环境中导致短期、中期和长期价值的创
造、保存或侵蚀的简洁沟通。
 Improve the quality of information available to providers of financial capital to enable a
more efficient and productive allocation of capital.
• 提高金融资本提供者可获得的信息质量，以实现更高效、更有成效的资本配置。
 Promote a more cohesive and efficient approach to corporate reporting that draws on
different reporting strands and communicates the full range of factors that materially
affect the ability of an organization to create value over time
• 推广一种更具凝聚力和更高效的企业报告方法，利用不同的报告线索，传达对组
织长期创造价值能力产生重大影响的全方位因素
 Enhance accountability and stewardship for the broad base of capitals (financial,
manufactured, intellectual, human, social and relationship, and natural) and promote
understanding of their interdependencies
加强对广泛资本（金融资本、制造资本、智力资本、人力资本、社会资本和关系资
本以及自然资本）的责任和管理，并促进对其相互依赖性的理解
 Support integrated thinking, decision-making and actions that focus on the creation of
value over the short, medium and long term.
支持注重短期、中期和长期价值创造的综合思维、决策和行动。

 Integrated reporting is part of an evolving corporate reporting system. This system is

enabled by comprehensive frameworks and standards, addressing measurement and
disclosure in relation to all capitals, appropriate regulation and effective assurance.
Integrated reporting is consistent with developments in financial and other reporting, but
an integrated report also differs from other reports and communications in a number of
ways. In particular, it focuses on the ability of an organization to create value in the short,
medium and long term, and in so doing it:
• 综合报告是不断发展的企业报告系统的一部分。 该系统由全面的框架和标准支
持，解决与所有资本相关的衡量和披露、适当的监管和有效的保证。 综合报告与
财务和其他报告的发展是一致的，但综合报告在许多方面也不同于其他报告和通
讯。 它特别关注组织在短期、中期和长期创造价值的能力，并在此过程中：

 Has a combined emphasis on conciseness, strategic focus and future orientation, the
connectivity of information and the capitals and their interdependencies
注重简洁、战略聚焦和未来导向、信息与资本的互联互通和相互依存
 Emphasizes the importance of integrated thinking within the organization
强调组织内整合思维的重要性

The primary purpose of an integrated report is to explain to providers of financial capital how
an organisation creates, preserves or erodes value over time. It therefore contains relevant
information, both financial and other. An integrated report benefits all stakeholders interested
in an organisation’s ability to create value over time, including employees, customers,
suppliers, business partners, local communities, legislators, regulators and policy-makers.
综合报告的主要目的是向金融资本提供者解释组织如何随着时间的推移创造、保留或
侵蚀价值。 因此，它包含相关信息，包括财务信息和其他信息。 综合报告有利于所
有对组织长期创造价值的能力感兴趣的利益相关者，包括员工、客户、供应商、业务
合作伙伴、当地社区、立法者、监管者和政策制定者。

Carbon accounting is the process of measuring and reporting an organization’s greenhouse

gas emissions, in order to understand and reduce their impact on the environment. By
measuring and reporting on their carbon footprint, companies can identify areas where they
can reduce their environmental impact and set targets for emissions reduction. This not only
helps them to meet their sustainability goals but also positions them to take advantage of new
opportunities in the growing market for low-carbon products and services. Carbon
accounting is an important tool in sustainable finance and helps organizations to understand
their environmental impact and take steps to reduce it.

Carbon accounting is also increasingly being used to inform investment decisions. Investors
are becoming more aware of the risks and opportunities associated with climate change, and
are incorporating environmental, social, and governance (ESG) criteria into their investment
analysis. By measuring and reporting on their carbon footprint, companies can demonstrate
their commitment to sustainability and position themselves to take advantage of new
opportunities in the growing market for low-carbon products and services.
https://www.coolset.com/academy/sustainable-finance-the-role-of-carbon-accounting

Carbon accounting, or “greenhouse gas accounting”, refers to the systematic methodologies,

measurement, and monitoring used to evaluate and quantify how much carbon dioxide
equivalents (CO2e) an entity or activity emits. Carbon accounting measures emissions of all
greenhouse gases and includes CO2, methane, nitrous oxide, and fluorinated gases. Gases
other than carbon are expressed in terms of carbon equivalents.
https://plana.earth/glossary/carbon-accounting#what-does-carbon-accounting-mean

Carbon accounting is an accounting method to count, inventory, track, and report your
organization’s greenhouse gas (GHG) emissions. This is also known as your carbon footprint.
For most companies, the established, global accounting unit for carbon is the greenhouse gas
carbon dioxide (CO2), and “carbon equivalents” (CO2e or CO2eq), the sum of carbon plus
other emissions like methane converted into carbon.

As climate change worsens and more investors, regulators, customers, and partners
encourage and pressure companies to improve their sustainability, the number of businesses
practicing carbon accounting has grown significantly over the past decade – a trend we
expect (and hope) will continue.

How carbon accounting works

If you’re familiar with financial accounting, which adds up income and expenses into a
budget, carbon accounting works in a similar way. An organization’s emissions are its carbon
inventory, which can be reduced or netted against carbon improvements or offsets.

Common practice in carbon accounting is categorizing CO2 as Scope 1, Scope 2, or Scope 3

GHG.
Scope 1: direct emissions – result from direct activities of your company, e.g., buildings and
vehicles company directly owns or controls.

Scope 2: purchased emissions from electricity, heating, steam, and cooling. E.g. electricity or
natural gas that’s purchased from a local power utility to powers building or facility
Scope 3: indirect emissions. E.g. many companies-particularly companies with a physical
product and supply chain. It represent most of the company's carbon footprint or inventory.
e.g.purcahed raw materials, distribution, transportation and shipping of product and customer
usage and end-of-life treatment
https://www.brightest.io/carbon-accounting-methods

Carbon accounting allows organizations to quantify their greenhouse gas emissions,

understand their climate impact and set goals to reduce their emissions.
Scope 1: release directly from sources that owned or controlled by an organization.

Scope 2: release from the electricity, steam, heating and cooling purchased by an
organization.

Scope 3: indirect greenhouse gas emissions that occur as a consequence of the activities of a
facility, but from sources not owned or controlled by that facility's business.
https://www.ibm.com/topics/carbon-accounting

Impact of Sustainability Reporting on Financial Performance:

Enhanced Stakeholder Trust: Sustainability reporting demonstrates transparency and

accountability, building trust with investors, customers, employees, and other stakeholders.
This trust can enhance the organization’s reputation and brand value, leading to increased
market share and customer loyalty.

Trust and Reputation: Sustainability reporting demonstrates a company’s commitment to

responsible and ethical business practices. This transparency builds trust and enhances the
company’s reputation among stakeholders, including customers, employees, suppliers, and
communities.

Risk Management: Sustainability reporting helps identify and manage environmental, social,
and governance (ESG) risks that could impact financial performance. By addressing these
risks proactively, organizations can minimize potential liabilities and safeguard long-term
value creation.

Risk Mitigation: Sustainability reporting helps investors assess the risks and opportunities
associated with a company’s ESG performance. It allows investors to gauge the long-term
viability and resilience of an organization, enabling better risk management and informed
investment strategies.

Employee Engagement and Retention: Companies that prioritize sustainability and

communicate their efforts effectively tend to attract and retain talent that values purpose-
driven work. Sustainability reporting helps align employee values with the company’s
mission, leading to increased engagement and improved retention rates

https://medium.com/@theinsightspr/the-impact-of-sustainability-reporting-on-investor-
relations-and-stakeholder-engagement-market-b901c98f3239