From accounting to action

This past year has been one of contrasts for corporate sustainability. On the one hand, we’ve seen a real desire from clients to move from ‘accounting to action’. We’ve seen this change not just within sustainability teams, but across all business functions. Target years are fast approaching and the case for acting on sustainability is understood. On the other hand, we’re seeing an unprecedented amount of change to underlying environmental accounting norms. This inward, theoretical focus has soaked up attention and has felt like a hinderance to action.

Building the plane as you fly it

The two key areas of methods development relate to corporate nature risk and impact assessment. We have the Taskforce on Nature-Related Disclosures (TNFD) and corporate greenhouse gas accounting in the land sector (e.g. SBTi FLAG and GHG Protocol Land Sector Guidance). Both of these topics impact upon major sustainability ‘hotspots’ and have ratcheted up data and analytical requirements. To add to this, The Greenhouse Gas Protocol has started a wholesale review of its standards. These developments mean that the technical underpinnings of much of modern corporate sustainability (i.e. quantifying and reporting changes in impacts over time) will continue to evolve well into 2025 and potentially beyond.

This evolution, while needed, has introduced an unhelpful amount of uncertainty and frustrations into discussions this past year. This has led to a seemingly constant need to re-communicate changing expectations to a range of stakeholders. The analogy of “building the plane as you fly it” has never felt more apt.

This desire for more detailed data and methods to underpin corporate sustainability is understandable. After all, the outputs of these analyses increasingly feature in regulated disclosures and are used in the assessment of corporate risk, financial products, etc. Non-financial disclosures increasingly come under the oversight of Chief Financial Officers and their teams, so it’s unsurprising that financial-grade expectations on data management and reporting processes are on the agenda.

Sectoral gap in technical capacity

Although software and AI has the potential to do some heavy-lifting we need to be realistic: they’re not going to work miracles. There will be a need for growing numbers of technically literate sustainability practitioners for years to come. This past year has made obvious the elephant in the room: in-house and consulting capacity to respond to these growing expectations are orders of magnitude behind where they need to be. This lack of capacity is one of the reasons we supported the launch of the Carbon Accounting Alliance (CAA) last year and is why it has seen a phenomenal growth in membership in only a few months. Practitioners in this space were really feeling the pressure in 2023 and working together on “technical alignment” and “professionalisation” (two of the three focus areas of the CAA) is long overdue and much needed.

Beyond the technical challenges of meeting these new accounting demands, balancing the ‘accounting’ versus ‘action’ conundrum has become a key dilemma facing client budgets. The reality is that the technical side of our sector (i.e. the methods, data, and accounting) will remain critically important and an area of significant growth. We need a science-based approach to sustainability to ensure we focus on the right issues and deliver authentic progress. For example, measuring impacts relative to scientific thresholds consistent with sustainable development – and avoiding greenwash.

A maturing sector

We need to acknowledge that sustainability is undergoing a much overdue maturing into a discipline that enables business change and transformation.

This change is exciting and means our sector needs to mature too. It requires a greater focus on implementation, deepening sector and issue expertise to provide deliverable solutions, and the need to be a “critical friend”.

In response, 3Keel is maturing. Last autumn we brought together our existing climate change, nature, and circular economy experts into a single team, focusing on corporate-level sustainability.

Practically speaking, this means ensuring impact and risk insights are combined with a wider package of support that helps clients with the more important challenge: ensuring business models transition to a nature positive, circular, and net zero future. This means more work on decarbonisation implementation, transition planning and corporate governance. It means more work in capacity building, product innovation and empowering in-house teams to make the case for change. It also requires more collaborations with colleagues in our Agriculture & Landscapes and Commodity Supply Chains business units to develop programmes that translate accounting to action and outcomes.

Target dates must focus our minds

In all the work we and our clients do to monitor, measure and report on progress, it’s important to remember why we’re acting. Climate change and its attendant effects on nature and biodiversity are with us, affecting many sectors, businesses and communities every day, all over the world. There’s a reason that 2025 and 2030 became key target dates some years ago; if we don’t meet the targets set, there will be changes wrought on our day-to-day lives that are hard (or impossible) to reverse, and incredibly difficult to mitigate.

Despite all the challenges, with target years looming, don’t let accounting uncertainty delay action.

If you’re interested in our work in this area, please get in touch