Sustainability reporting has become a global phenomenon due to increased CSR awareness. Although there are some universal solutions, how sustainability reporting is carried out and who performs it varies from country to country. Professors Carlos Ramirez and Adrian Zicari, ESSEC Business School, analyze the reasons why the accounting profession has been unsuccessful in becoming the leading provider of sustainability reporting in Argentina. In this context, they highlight the adoption of international reporting models that do not account for the unique CSR issues that are specific to the country

By CoBS Editor Celine Sophie Lüdtke. Related research: Between a corporatist past and a globalized future: Argentina’s accounting profession and the social balance sheet, Carlos Ramirez and Adrián Zicari, Critical Perspectives on Accounting (2023).

How Argentinian accountants missed the beat for jurisdiction in sustainability reporting

The Argentinian Tango is the most well-known type of Tango worldwide and is the one that is most commonly taught. However, there are several other Tango variations such as the Uruguayan Tango, the Nuevo Tango, and even the Finnish Tango, which are all popular in their respective countries. These numerous Tango variations have evolved based on cultural influences, music styles, and socio-economic contexts, each well-suited for the region or country where they are popular. Why mention these variations?

Well, a similar dynamic can be seen in sustainability reporting: There are different approaches depending on the region or country, and even differences in who creates these reports. In their study, Professors Carlos Ramirez and Adrián Zicari specifically looked at Argentina – a country with a politico-economic background dissimilar to its North American and European counterparts. They investigated the recent history of sustainability reports in Argentina, and saw how the lack an Argentinian-specific model for such a report and the failure of the Argentinian accounting profession to become a leader in sustainability reporting, were connected.

One shoe fits all? The special case of Argentina

In Argentina, the accounting profession has failed to expand its influence to retain jurisdiction over sustainability reporting. While attempts to do so have been made, they have been largely unfruitful. Eventually, the Argentinian accounting profession relented and officially adopted the already prevalent Global Reporting Initiative (GRI) sustainability reporting model, effectively giving up its efforts to control the process. 

Being that Argentina, and Latin America, in general, are quite unequal in terms of value distribution, it is therefore crucial for companies to address the issue of income inequality in their sustainability reports through Value Added Statements (VAS), a reporting model that explains how much economic value is shared among different stakeholders. While in Brazil it is mandatory for all quoted firms to present a VAS, those reports remain optional in Argentina. As companies follow the GRI, they rarely incorporate country-specific sustainability indicators.

Keeping up with the Joneses

GRI is one of the most widely used sustainability reporting standards both globally and in Latin America. Indeed, the South is keen to adopt global processes and behaviours: local managers perceive global sustainability tools such as the GRI as ways to modernize their companies while not necessarily agreeing with the need for sustainability.

Argentinian critics argue that companies manage sustainability as a risk rather than a priority, and consider it relevant only to the extent that it affects their shareholders. Due to this lack of internal drive for sustainability beyond its association with being modern, companies often neglect to utilize local reporting tools that would better reflect their social impact. To enhance sustainability reporting, it is important to comprehend the dynamics behind this status quo.

Sustainability Reporting: Accounting’s final frontier?

Ramirez and Zicari interviewed industry experts and professionals to gain a better understanding of the realities of the Argentinian accounting industry. They then applied Abbott’s theory of professions to analyze why the Argentinian accounting profession failed to assert its claim on sustainability reports.

Essentially, professions gain legitimacy to practice in their field by having a basic theoretical knowledge – for example, through a university degree – which they can effectively apply to solve practical cases. That way, they have jurisdiction over a field of activity. Professions often attempt to increase their influence and jurisdiction. They may do this by taking over the jurisdiction of other professions or by claiming new, emerging fields of activity, in this case, sustainability reporting.

Argentina: Remnants from the past

The accounting profession in Argentina has a unique structure that is deeply rooted in the country’s history and heavily influenced by politics. During the Cold War, the government in power brokered a deal between Peronist trade unions and the state to bring stability to the country. As part of this agreement, private “professional councils” were established for each province and Buenos Aires. These councils were tasked with controlling the accounting profession, keeping a registry of all economic science professionals, protecting the interests of the profession, and fighting against illegal practices. To become an accountant in Argentina, candidates must hold a university degree and register with their respective council. In addition, in 1973 the FACPE “Federación Argentina de Consejos Profesionales de Ciencias Económicas” was founded to coordinate the action of all the councils and propose accounting standards. This reliance on political and administrative structures would pose a challenge for the accounting profession when they attempted to meet new market demands.

An old system with new realities

In the process of globalization, and with a growing focus on CSR and sustainability, Argentina implemented laws in the 1990s and early 2000s that required companies to report on employment conditions. This marked a significant step towards CSR reporting in Argentina. In subsequent years, several legal initiatives, such as Law 2594 in Buenos Aires, attempted to make it mandatory for companies to create a Sustainability Report. However, and despite numerous efforts, companies strongly opposed these initiatives, and that later law was never enforced.

The Argentinian accounting profession saw its opportunity to expand its jurisdiction and become the sole legal provider of sustainability reporting. However, without a legal basis to claim jurisdiction over sustainability reports, the profession was unable to mobilize and respond to market conditions. Other professions presented rigid competition, and the accounting profession failed to convince society and policy makers of having a particular claim over sustainability reporting. While the Argentinian accountants provided an alternative and adapted solution to their context, based on the notion of Value Added Statements, their proposition remain optional, and in practice, scarcely used.

Looking beyond existing theory

In this story, Professors Ramirez and Zicari show that Abbott’s theory of professions is insufficient to grasp all the reasons and dynamics for the failure of the accounting profession to extend its jurisdiction. While elements of the theory are of course mirrored in the Argentinian reality, it disregards crucial dynamics specific to Latin America and Argentina.

Ramirez and Zicari highlight how it is necessary to explore the history and sociology of the accounting profession in Latin America, taking into consideration the cultural, social, and economic realities that coined the profession. They suggest that theories of professions must take into account the diverse realities and numerous elements that exist, which cannot be captured by a single universal model.

In the case of sustainability reporting in Argentina, market elements pushing for a voluntary sustainability reporting, as well as the accounting profession failing to engage other stakeholders, facilitated the uncritical adoption of international, little-suited universal sustainability reporting models.

Learning Tango is similar to local accounting models in the sense that we need to consider the variation that is best suited for the region we live in. We also need to see from whom we take dance lessons – who is the most qualified? And why is that the case? A dance instructor with years of experience or informal instructors and lessons? All of this depends on the region where we learn the Tango and how it developed culturally.

Useful links:

• Link up with Profs. Ramirez and Zicari on LinkedIn
• Read a related article: Social Accounting – measuring sustainability
• Discover ESSEC Business School
• Apply for the ESSEC Global MBA.

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