Laurent Le Pajolec
Member of Board EXCO A2A Polska, Kreston Global ESG Committee member
General Manager and shareholder of consulting companies with a Marketing/ business development and a Financial background with direct experience with several sectors (Real estate, Transport, Fintech, Legaltech, M&A, Import- Export, HR, Restructuring). Exco Polska Board Member.
The role of accounting in driving the sustainability agenda
February 15, 2023
What is the role of accountancy in the sustainability agenda and can it save the planet? Can accountancy firms make tangible the intangible as ESG regulations come online in each country? From Corporate social responsibility (CSR) to a purpose-driven firm: Transforming an accounting firm into a responsible business for a better world.
Is the role of accounting and consulting firms to help win the fight against global warming?
Having run an accounting & advisory firm since I was 27 years old, I am fortunate to have a real say in what I can do to make my children proud. As a father, I am deeply concerned about what type of planet and life we leave for our children thanks to climate change and the collapse of biodiverse systems.
Accounting has always been aligned with the environment. Evidence of accounting and inventory systems was discovered in 4000 BC in Egypt, and of course, double-entry bookkeeping was created by Luca Pacioli in the 15th century.
The Industrial Revolution brought new analytics concepts and additional reporting thanks to the need to split information between shareholders and board members. So, as we face the greatest ecology emergency of our time, it is not a surprise to see a new evolution in accounting, “triple capital accounting” to be provided by firms (New methods such as CARE, LIFTS, and others).
It is time for the accounting and advisory sector to step into driving the sustainability agenda! Like me, many professionals in the industry want to give sense to what we do and work on our global impact. Our sector will be more attractive and participate in making a better planet. We will be an excellent example for our clients and other stakeholders to follow.
So how can we do that? I went on this journey myself with my firm and hope to show you how we took steps to create a “modern ecologically-driven and socially responsible” firm, and how we went from “CSR” to being purpose–driven. Our goal is to become a role model in our sector and use this leverage we have as advisors to change the world.
Accounting leading sustainability policy implementation
Two great examples that pushed me to change: 75% of terrestrial ecosystems are degraded due to human activities (IPCC Report) and the % repartition in mammals on earth: 36% Human, 60% Domestic, and 4% wild animals. (Nicolas Antheaume, professor University IAE Nantes). Maybe for readers, it could be the nine planetary boundaries;
- Stratospheric ozone depletion
- Loss of biosphere integrity
- Chemical pollution and the release of novel entities,
- Climate change
- Ocean acidification
- Freshwater consumption and the global hydrological cycle
- Land system change
- Nitrogen and phosphorus flow to the biosphere and oceans
- Atmospheric aerosol loading
Credit: “Azote for Stockholm Resilience Centre, based on analysis in Persson et al 2022 and Steffen et al 2015”.
6 of the 9 limits are reaching dangerous levels. Seeing these numbers, we can understand why scientists are scared and are warning us about the risk to our planet.
But what is the level of understanding of my stakeholders? As a partner, I wrote an ambitious strategic plan for our CSR. The reality was a disaster because I was the only person who understood it. I forgot the strategy’s most important pillar of the strategy; education and helping others become aware of the ecological emergency. So, we set up first a program of awareness dedicated to stakeholders: employees, shareholders/partners, clients, and suppliers, and included the “Stockholm resilience centre’s nine planetary boundaries” in our CSR.
The awareness program helped us to ensure that our stakeholders acquire knowledge helping you to make them understand the firm’s CRS Strategy. We use for example material and well-known resources from the Stockholm resilience centre, WHO, Unesco, UNEP, or IPCC (reports about climate change). We prepare materials for them, such as ecological quizzes and newsletters. Additionally, in our firm, we decided to deliver some key educational workshops as part of the awareness plan:
Climate Fresk (https://climatefresk.org/) (Popularization of IPCC’s reports) and 2Tonnes workshop (https://en.2tonnes.org/) (Individual carbon footprint).
We formed 3 animators in our firms who deliver guidance to all employees and will deliver these workshops to new employees during their onboarding. Thanks to this internal strategy we will be sure that we are all on the same page.
As we say in Romanian: “Ai Carte, Ai Parte” – if you have the education you have a bright future. After educating staff, the next step was for us to measure our impact.
Measuring Net Zero
The second step was to measure our impact, create indicators, and Include them in all our decisions. We also use indicators to compare in time to ensure that we are in a good way. Controlling and accounting might not be enough to see your impacts. Generally, companies are focused on the following KPIs: profit, customer & employee satisfaction. We decided to include the following indicators too: energy assessment, resources SWOT Matrix, carbon footprint, water footprint, impacts on biodiversity and planetary boundaries.
Concerning carbon footprint will help the company identify which prioritized positions must be optimized, reduced, or deleted. Analyses help to ensure that you do not pass the impact to your suppliers or customers.
Focus on net zero Initiative: To offer an alternative to the simplistic claims of “carbon neutrality” and “offsetting” by companies, the net zero initiative proposes a unique reference framework for private sector action in favour of the only carbon neutrality objective that makes sense: that of the planet and the national territory. To structure their climate action, companies must distinguish three different types of action, which are not fungible:
- Reduction
- Avoidance
- Sequestration
The priority is the reduction. Businesses should maximize their contribution to reducing emissions and increasing global sinks by acting on three levers in parallel:
A: Reduce their direct and indirect footprint by following a 1.5°C compatible trajectory
B: Helping others to reduce, through the sale of decarbonized products and services, and the financing of avoidance projects outside the value chain
C: Remove carbon from the atmosphere through sinks in and out of their value chain
Carbon footprint and the net zero initiative are focused on CO2 Emissions. We are working on other indicators which help us to be better: our water footprint to identify the needs of water for our activity, ROI indicators (avoided costs, productivity, risks reductions, an increase of turnover), employer branding (an increase of qualified candidates), set up an SROI (social return on investment) and biodiversity indicators.
The purpose is to have a global approach and to use different indicators: process and resources optimization, reduction and sobriety included in our low carbon strategy. Indicators are important but what to do with them?
Laurent Le Pajolec
Tangible sustainability measures
After working on indicators, it is important to do something with them. What is in my sector a real goal to set up? What level of carbon is correct to respect Paris COP engagement? What is my ambition?
We need to anticipate the following questions: How much emission is my sector entitled to? Which ranking could be coming in the future? (Turnover, turnover vs carbon emission or turnover vs used resources).
Based on the indicators, in particular the carbon audit, we are working on the main reductions to be made by explaining them to employees and partners: reduction of travel (planes, cars in favour of virtual working and train travel), an extension of the duration of use of IT equipment, reduction of office space, reduction of energy costs, etc.
HR aspects should not be underestimated. We organized a project team including employees, board members/partners, change specialists, and professionals of subjects (process, climate change, biodiversity). Board members-Partners must empower the team to prepare the options and actively participate in the project.
Avoiding greenwashing
Greenwashing conveys a false impression or misleading information about how a company’s products are environmentally sound. For example: communicate what is easy to implement or small gesture with small impacts or to communicate on offsetting instead of sobriety and reduction. Transparency is good practice, for example presenting the results of realised decrease in carbon emissions rather than carbon offsetting amount.
Sustainability, carbon offsetting and reducing emissions
The last step in our strategy was to find a way to offset our reduced emissions or to act positively on the environment thanks to external projects.
What Are Carbon Offsets?
Carbon offsets are a way to cancel out greenhouse gas emissions by funding an activity that will remove a supposedly equal amount of carbon dioxide from the atmosphere or prevent an equal amount of carbon pollution. Everyone can purchase them from major companies pursuing net-zero emissions goals to individuals looking to compensate for high-carbon activities like flying.
Carbon offset cannot distract firms from reducing emissions. The first tasks we identified are: reducing, optimising, and going to sobriety. It means to work on reducing our carbon footprint and then to offset thanks to projects financed by purchasing “carbon offsets”.
Is replanting trees a green solution?
Trees store carbon, which slows down global warming. The older it is, the more carbon the tree has already stored and needs. So we might as well say that we need to conserve our forests more than plant new ones, but go and explain that to the deforestation industries. Replanting is a part of the solution, but which tree species should be planted in which ecosystems or which ones will be able to adapt in this period of climate change?
Anecdote: how many trees would be needed for the CO2 emitted yearly? 1 Tree = 35 Kg CO2 / Year. If we add up the potential of 6 GtCO2eq and the 6 GtCO2eq already absorbed by forests, we arrive at 12 GtCO2eq. Under current conditions, it would therefore take 4.5 planets to absorb all of our annual emissions by planting trees, not counting the emissions already emitted by our activities since the industrial revolution*.
Limits: One report found that only around 0,9 billion hectares of land on Earth are available to plant to offset greenhouse gas emissions. Additionally, some articles show other limits as risks of monoculture (lower effectiveness, impact on biodiversity…) and risks of Displacement of indigenous populations… Scientifics are more precautious about the real impact of offsetting versus reduction and sobriety. It is difficult for example to see the impacts of planting trees or mangroves in the short term.
Before engaging with foundations and organizations proposing replanting solutions, please check if they do not cross the limits. A lot of organizations are global or local. We will enumerate for example EcoTree (convert land and convert it into sustainable forests), Rainforest Connection (Prevent illegal reforestation), Ecologi (fund climate projects and compensate), and local replanting actions (in Poland).
Sustainability solutions
• Time for the Planet – Climate dividends: Time for the Planet is a not-for-profit company collecting funds to invest in innovations that capture or reduce carbon emissions. 1 share is 1 EUR. Never will they distribute any dividends but climate dividends which means all carbon that innovations will help to avoid or capture. To have a global impact, all innovations must be open source. NB: Example of projects financed which will give to our firm Climate dividends: Cool Roof France (A passive and low-tech solution for the protection of buildings and cities against high temperatures due to climate change); Shyva (Improving green hydrogen production with a simple and robust organic process), Beyond The Sea (Make kite-pulling efficient, universal and essential for carriers of all sizes), Carbon Time (Turn Gigatons of CO2 into rock through a natural process), Leviathan Dynamics (Producing cold efficiently and sustainably, by replacing hazardous and polluting refrigerants with water)…
• 1% for the planet: Collecting 1% of companies’ turnover to provide funds for solutions to Wildlife, Water, Pollution, Land, Food, Climate…
• Invest in renewable Energy/low-carboned energy sources to replace fossil fuels.
When we succeed in completing these previous parts in a short period, we will be able to become climate heroes and help our clients to transform.
Using your influence to turn clients green
We plan to use our experience and skills to help customers in the transformation. First, we will open our awareness program to them, and we have already started with some workshops.
The change gives us new consulting missions to provide. (KPIs, financing, certification, identifying projects to offset, providing triple capital accounting, ESG Reports…)
The journey is costly in time and money, but it is worth it. The next generation needs it. Let’s all be in action and change the world. There is no Planet B and our sector has a great opportunity to be part of this positive change. To conclude with a quote from Saint -Exupery “To be a human being is to be responsible”. Let’s act.
Sources :
https://www.ecowatch.com/indigenous-lands-climate-goals.html
https://www.net-zero-initiative.com/fr
https://www.stockholmresilience.org/
https://vert.eco/articles/combien-de-planetes-faudrait-il-pour-compenser-lensemble-de-nos-emissions-de-co2-en-plantant-des-arbres
To talk to us about sustainability solutions, contact us here.
