How has the pandemic impacted society and the planet? What lessons can be learnt from a past of economic recovery packages? Professor Charles Cho, Schulich School of Business, Juliette Senn, Montpellier Business School, and Madlen Sobkowiak, Birmingham Business School, offer an analysis and blueprint for social and environmental accounting to help transform the take-take to a give-give.   

How Social and Environmental Accounting Can Change the Nature of Our Game, by Tom Gamble. Related research:  Sustainability at stake during COVID-19: Exploring the role of accounting in addressing environmental crises, Charles Cho, Juliette Senn, Madlen Sobkowiak, Critical Perspectives on Accounting, Elsevier.

The nature of our game

For millions of years Nature – the environment – shaped the evolution of humankind. From physique and physiognomy, to cognitive capacities to tools, behaviours and habitat. And from early biped to modern day Homo Sapiens Sapiens.

This nature-based change-maker on our behaviours began to lose its influence with the development of agriculture some seven thousand years ago in what is now modern-day Irak and Syria. Sedentary occupations flourished. Language and counting (even accounting) was formalized. Humans began exploiting their natural habitat in order to stay put, grow richer, defend themselves and trade – water, wood, stone, stone, sand, minerals (and centuries later oil and gas too). 

It sounds like any number of games that have reached our screens and leisure time. But what these games rarely show as we build our empires and conquer, is that the increasing levels of industrialization, population and urbanization of our civilizations over time have resulted in a sharp rise in environmental issues that now include climate change, air-sea-land pollution, water depletion and destruction of our forests and biodiversity. In all appearances, it sadly seems that the human-planet relationship has increasingly turned from a give-give (our respect and humility before nature, and nature as a provider of plentiful resources) into a take-take – human over-exploitation and dominance, and nature’s answer in the form of increasing climate and health crises.  

A different angle and the nature-humans-virus link

In an inspiring research-oriented call for action recently published in Critical Perspectives on Accounting, Professor Charles H. Cho and his colleagues point to the true nature of the game, pointing out that by now, humanity has stepped over at least three of the ten planetary boundaries required to establish a safe living environment – the rate of biodiversity loss, climate change, and the nitrogen cycle.

Moreover, researchers have drawn the link between the destruction of natural habitat and pandemics, including our most recent – COVID-19 – which is generally agreed to have originated from wild animals sold in a market in Wuhan, China in December 2019.

Although the transmission of viruses from wild animals to humans are nothing new, with at least 60% of emerging infectious diseases between 1960 and 2004 originating in non-human animals, there is increasing evidence that these animal-to-human transmissions are linked to ecological changes. Witness, as some of us may have seen, wildlife entering suburbs, parks and even city centers in search of food. As such, this proximity increases the risk of transmitting disease.

A further result of the damage done to our environment is the Earth’s capacity to transform CO2 to oxygen. Studies in 2020, for example, show that the high COVID-19 mortality rate northern Italy was influenced by the higher air pollution in the region. Altogether, by March 2021, some 114 million cases of COVID infection had been reported worldwide, with an estimated minimum of 2.5 million deaths. 

Did lockdown decrease environmental destruction?

We all remember the eerie silence and emptiness of lockdown, as one by one countries from east to west brought their industries to a halt, shutting down factories, shops, schools and access to public places such as parks and beaches. Commuter and air traffic stopped. Shortly into the global lockdown, the WEF posted satellite images of several large cities and their CO2 imprint pre-Covid compared to confinement. The results were stunning – huge patches of black, brown and red had been replaced by grey and white where pollution had virtually ceased.  

Indeed, in April 2020, daily CO2 emissions had decreased by 17% compared to 2019 levels, with more than half of this being accredited to the halts in land and sea transport. A large slice too resulted from air travel with 96% of flights cancelled and international travel reaching its lowest level in 75 years.

But for Profs Cho, Senn and Sobkowiak, not all lockdown policies were as effective and positive for the planet as they appear at first glance. They argue that some effects of the COVID-19 pandemic will be more detrimental to the environment in the long term. Despite the drop in pollution levels, the WMO compared it to “only a tiny blip” in the continuing increase of CO2 in the air due to human activity. Moreover, as highlighted by the IEA and more recently during the COP26, emissions have rebounded in 2021, exceeding 2019 levels, and are expected to reach 36 gigatons by 2027.

Overall, governments’ commitments to decrease emissions amount to a mere 15% – not enough to put an effective and real restraint on global warming. There are other alarming signs – for one the fact that in 2020 our global footprint exceeded one Earth. Another, that of an analysis appearing in the journal Nature showing the planet close to reaching the 9 tipping points after which the planet will collapse.

The pandemic has also brought about another environmental concern – that of the treatment of medical waste linked to COVID-19. Hospitals are estimated to have produced six times more medical waste during 2020-early 2021 compared to pre-pandemic days and it is not only the quantity but the type of waste that creates a problem. A surge in demand for plastic has brought about a global boom in production for items such as masks, gloves, ventilators and tests. These will eventually end up in landfills or in the ocean – adding yet another layer to the existing environmental problems of water and air pollution, soil erosion and deforestation.

Recovery – lessons from the past

Pretty bleak stuff. Though humankind is reacting. How? For one, governments have attempted to deal with crisis recovery through policy, with one of the most common being stimulus packages to cater for the urgent needs of economic recovery, combatting unemployment, and accelerating decarbonisation.

The €750bn EU package dubbed Next Generation EU is a shining example, with €500 billion dedicated to sustainability alone. Energy efficiency, the development of renewables, green transport and agriculture, and environmental protection feature as ways to go about creating a sustainable future. The package supplements a wider plan – the European Green Deal – in line with the UN SDGs to invest €1 trillion over ten years with the objective of reducing greenhouse gases by 30% come 2030.

But such packages aren’t particularly new, with past failures providing the opportunity to learn for the future, asserts Prof Charles Cho. After the 2008 financial crisis, $3.3 trillion were allocated worldwide by the leading economic nations, with around $522 billion set aside for green measures. But although CO2 emissions dropped in the year following the launch of these recovery packages, they rapidly rose by 5.9% in 2010 to reach a record high as governments rebooted their economies.

For Cho, Senn and Sobkowiak, this clearly points to the necessity of re-assessing government policies with the long term environmental impact they will generate. While former EU policies lacked sufficient supervision and control over activities rallied to environmental strategy, steps such as the EU Climate Law that includes a progress monitoring system have been taken to rectify things. Unfortunately, to date, most of the measures contained therein remain unenforced.

A further stumbling block is that the sustainability goals contained within recovery packages have tended to be subordinate to economic goals. This defines what governments take into account – and what they leave out – in their decisions. For example, in the 2008 package, airlines and oil giants formed the targets, leaving the rest of the heavy CO2 producers relatively free to carry on as normal.

Sustainability, contend Cho, Senn and Sobkowiak, goes much wider than simply individual corporations – and indeed concerns everyone and every living thing that relies on nature. As such, they see the accounting and accountability mechanisms used to measure the results of recovery packages ill-suited to achieving long-term environmental goals.

One essential step for Accounting that may offer a giant step for humankind and the planet

In order to achieve real impact and positive change, state Profs Cho, Senn and Sobkowiak, accounting first of all needs to go beyond the paradigm that sustainability depends on what corporations alone should do to help address the environmental crisis. The blueprint they offer for transformation to take place includes a set of recommendations for action:  

• Include an ecosystem of wider stakeholders with alternative accounts produced, for example, by expert reports, NGOs and online journals, and as such adding to the knowledge that corporate leaders and governing bodies gather in order to make long-term and sustainability-oriented decisions.
• Integrate a systems-approach that takes into account the links and interactions between corporations, society and ecology rather than treating companies as detached from their natural environment.
• Use science and technology for scenario modelling and setting emissions targets. Use indicators based on climate-related risks and dependencies to help establish the links and impacts of a company’s links with society and the environment.
• A shift in how we understand accountability, the functions and the boundaries of existing accounting techniques and tools. This will help clarify whether current measuring and reporting against sustainability indicators actually has an impact on climate change mitigation and actions.
• Focus on how accountability can bring light to industries on the long-term risks and opportunities of climate change.
• Adopt a multi and transdisciplinary approach to social and environmental accounting which brings on board the expertise of scientists, biologists, and scholars.
• Transform the way we teach accounting and future accountants, auditors and managers, by blending in courses in ethical accounting, sustainability, and stakeholder theory to traditional curricula. And by using multidisciplinary thinking in programmes such as experiments, design thinking, business modelling and systems mapping.        

The reality of current reports and analyses seems to indicate that COVID-19 has made reaching “net zero” by 2050 even tougher to achieve. As economies pick up after the crisis and activity gains pace, levels of pollution will surely rise, the Earth’s resources surely deplete further, and environmental destruction increase. The negative impact on society and humankind – Nature’s revenge, as some might say – will naturally follow.

Faced with this emergency, it is time to shed our denial and leave the business-and-habits-as-usual approach behind. Accounting and accountability can have an important role – perhaps even a keystone role. It has the potential to offer transparent, inclusive and ethically sound data at the intersection of business, government, society and planet. And this is key for the decision-makers of this world – from international organisations to leaders of states, to CEOs and consumers – to make sound judgement, sound choices that spark the end of the take-take relationship between humankind and nature and renew a give-give future. Such is the ideal balance sheet.

Useful links:

• Link up with Profs. Charles Cho, Juliette Senn, and Madlen Sobkowiak on LinkedIn
• Read a related article: Social Accounting: Measuring sustainability
• Discover our guest institution, Schulich School of Business, Canada.

Learn more about the Council on Business & Society

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The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.  

In 2020, member schools now number 7, all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.

• ESSEC Business School, France-Singapore-Morocco
• FGV-EAESP, Brazil
• School of Management Fudan University, China
• IE Business School, Spain
• Keio Business School, Japan
• Trinity Business School, Trinity College Dublin, Ireland
• Warwick Business School, United Kingdom.