CH A P T ER

1
Introduction to sustainability
accounting and accountability

Before starting to explore the topic of this book it is perhaps useful to take a
moment to reflect on some key questions. What kind of world do we want to live
in? What is the state of the natural environment in that world? How are the
societies organised? How do the economies function, and in whose interests? And,
importantly, how does that vision compare to our present reality?
If our vision is one that includes a healthy environment able to sustain life on
Earth, social justice for all, and fair economies which promote the fair distribution
of wealth and opportunity, then we must acknowledge that there is a gap between
our vision and our shared current reality. Scientific consensus regarding climate
change as a result of human activity is well-established and the effects of climate
change (increasingly being referred to as climate emergency, climate breakdown or
climate crisis) are all around us from extreme weather events, changing
landscapes, and climate refugees, the result of displacement due to rising sea
levels. High levels of biodiversity loss are causing growing alarm given the many
crucial roles of a healthy biosphere for all life. For example, healthy biodiverse soil
can sustain the growing of more nutritious foods in greater long-term quantities
needed by humanity and other animals than severely degraded soils. The
devastating effects of biodiversity loss are resulting in individuals, organisations
and countries across the globe working on ways to protect species of flora and
fauna and curb growing levels of extinction. These are just two examples which
illustrate the current state of the natural environment and the effects of
environmental destruction. Increasingly there is also attention being placed on
growing levels of economic inequality in many parts of the world, especially in the
West, and people living in poverty across the globe, in particular the Global
South.1 It is now commonplace to hear about social injustices occurring across the
globe and crises within the financial and economic systems.
Overall, the negative consequences and impacts of our current way of life are
increasingly being understood. Importantly, the role of human activity is also being
increasingly recognised and placed at the fore. How this way of life compromises our
ability for ecological integrity, social justice and economic stability is also being
recognised, leading to critical reflection and the recognition that we must act – and
act now. Dominant ways of organising our economies so as to maximise short-
term economic growth which have operated nearly unquestioned for decades are
under immense scrutiny. Economies and systems of organising that work for the few,
rather than for the many in current and future generations, are widely considered to
be part of the systemic reasons behind the current critical situation – the
unsustainability of our planet and livelihoods.
Issues of sustainability (and relatedly unsustainability) are the focus of this
book. While expanded upon in Part I, sustainability in this book relates to the long-
term viability of the natural environment, society and the economy or how, in the
long term, we might ensure social, environmental and economic sustainability. Or,
put another way, how we might move from the current unsustainable system to a
sustainable one. Organisations, including business organisations as key economic
actors, not only impact on the environment and society, they are also dependent on
the environment and society. As such, organisations and systems of organising are
central to any movement towards sustainability.
Accounting and accountability, and their relevance to sustainability, are the
particular focus of the chapters that follow. While all the above might be familiar
to you, you might be thinking, what has all this got to do with accounting?
Accounting is a powerful tool within societies. It is a key function in organising
economic activity and plays a central role in decision-making. Accounting is
traditionally conceptualised as financial and management accounting and related to
financial decision-making by those both internal and external to the entity. Take a
moment to think about what you know about accounting. It is possible that you
may be thinking about financial accounting and accounting as focusing on
numbers and finance, a process of collecting, analysing and communicating
financial information on the financial performance of an entity for financial
decision-making. A range of financial accounting techniques have been developed
to communicate to owners of an entity how the entity’s management has used
economic resources, demonstrating accountability for the financial resources for
which it is responsible and the financial impacts of its operations.
But, as is now commonly understood, organisations no longer have
responsibility and accountability only for financial resources. As the array of
environmental, social and economic impacts of organisations have become evident
(in particular the environmental and social impact of large corporations),
organisations have increasingly been required to be accountable for these impacts
and for their use of environmental and social resources. This has seen the need for
accounting to evolve and adapt. In practice, attempts to account for, and be
accountable for, environmental and social impacts have grown to be relatively
commonplace. However, many would argue, and as you will see in the chapters that
follow, that accounting and accountability practices still have a long way to go if
they are to be “fit for purpose” in a sustainable world.
Sustainability accounting and accountability refers to a range of techniques,
tools and practices that are used in the measurement, planning, control and
accountability of organisations with regards to environmental, social and economic
issues. Similar to financial and management accounting, sustainability accounting
has the potential to be a very powerful mechanism through which both individual
organisations, as well as their various stakeholders, can better assess the
environmental, social and economic aspects of activities. This can be both in relation
to accounting for the environmental,
 social and economic impacts of an organisation and its activities, or in terms of
assessing, evaluating and taking into account how an organisation is dependent
on its environmental, social and economic context. Sustainability accounting has
the potential to make visible issues which have previously been rendered invis-
ible by conventional accounting systems. It thereby broadens the spectrum
of information used in organisational decision-making and in evaluating
organisational success.
The use of sustainability accounting and accountability tools and techniques has
increased in recent years. Many organisations publish sustainability reports, major
accountancy firms have dedicated departments working with corporate
responsibility and sustainability accounting and assurance, while in everyday life
one can encounter all kinds of products and services labelled as “sustainable” or
“carbon-neutral” for example. As such, alongside this increased popularity there is
a need to understand these tools and techniques, critically reflect on them
(including how far they go in assisting in the transition to a more sustainable
world), as well as consider ways in which they might develop or envision new
tools and techniques that might take their place. This book attempts to both outline
current knowledge and practices as well as provide the basis upon which they can
be critically reflected on and new possibilities imagined. Each chapter has been
written with this in mind.

Introduction to the content and structure of the book

This book is intended to be of use to a variety of readers. In addition to providing a
broad discussion of the topic of sustainability accounting and accountability for
anyone with an interest in the subject, the book has been written to support the
variety of courses in this area. How this book can be used in these courses, and
further information for instructors, can be found in the next section. Here, we
introduce each of the four parts to the book.
Part I “Setting the context” follows this short introductory chapter. Part I
consists of two chapters. Chapter 2 “Background and global context” provides the
essential context and background information to the issues discussed in the book. In
particular, the broader environmental, social and economic challenges and
initiatives and agreements like the Sustainable Development Goals (SDGs) and
climate negotiations that provide the global context within which the issues in the
book are situated are introduced. In addition, Chapter 2 outlines what sustainability
accounting and accountability is. How sustainability accounting and accountability is
relevant to, and implicated in, the move towards a more sustainable society,
building on the introductory discussion above, is addressed as well as a consideration
of the challenges of what might be referred to as “conventional accounting”. The
various institutional settings for which sustainability accounting and accountability
is relevant, including corporates (for-profit), not-for-profit, social enterprises,
public sector and non-governmental organisations are also discussed. This
demonstrates the various organisational forms for which this topic is relevant and
also positions the remaining chapters in relation to this focus as it is important to
recognise that sustainability accounting and accountability is relevant beyond the
corporate context which often dominates discussions.
 In Chapter 3 we introduce some key concepts relating to sustainability
accounting and accountability. These key concepts, accountability, stakeholders,
materiality and externalities, are essential for understanding the role of accounting and
accountability for sustainability within contemporary societies. Moreover, these key
concepts provide necessary background for understanding much of the discussion
that follows in the next two parts of this book as they help make sense of the
assumptions and perspectives providing the foundations for the topic.
Part II of the book is titled “Accounting for sustainability” and consists of five
chapters. Each of these chapters introduces and outlines the various subject areas
where sustainability accounting and accountability has emerged and is relevant.
Chapter 4 begins this discussion.
Titled “Sustainability management accounting and control”, Chapter 4 includes
both a discussion of the practice of management accounting and control related to
sustainability (e.g. why and how do we assess, measure and control? And how do
we decide on those things to include in such practices?) as well as some of the
specific tools and practices (e.g. what is the practice within various institutional
contexts?). The aim of this chapter is to facilitate an understanding and critical
evaluation of sustainability management accounting and control and the tools and
practices which relate to it.
Chapters 5 and 6 discuss the practice of sustainability reporting, a key area of
practice and research in the field. In Chapter 5 we focus on providing an overview
of sustainability reporting, including a look at its historical development, the
various frameworks that exist for this form of reporting and a discussion of the
ongoing debate surrounding the regulation of practice and some key trends and
practices. In the following chapter, Chapter 6, we delve deeper into questions such
as why organisations produce these reports, whom they are targeting with them,
what is being reported, and how this is done. We also discuss the assurance of the
reports. As such, we consider the stages of the reporting process and key
influences, debates and discussions that occur at each stage.
Chapter 7 presents and discusses the increasingly visible practice of ESG
investments (environment, social, governance) within financial markets. In the
ESG context there is growing awareness of the increasing risks which escalating
global sustainability challenges are causing – not only to organisations but also to
social and economic systems more broadly. In this chapter we discuss how
sustainability accounting information and accountability relationships are
interconnected with financial markets and increasing ESG-investment activity.
This includes an understanding of how sustainability can affect the financial
performance and long- term success of an organisation, and also reflects on how
the financial markets can influence the social and environmental activities of
organisations. While understanding the sustainability impacts of organisations is
important, this chapter also highlights how accounting for dependencies can be
significant in the context of financial markets, risk management and investments.
The last chapter in Part II, Chapter 8, discusses the practice of external accounting.
This form of accounting essentially refers to accounts prepared by those external to
an entity and often associated with the accountability relationship. We discuss the
various practices which can collectively be referred to as external accounting as
they are relevant to sustainability accounting and accountability. In addition to
introducing this area of sustainability accounting and accountability, this chapter is
also useful in
thinking through the complexities of the topic – both in relation to encouraging
critical thinking, and for engaging in discussion on how the practice of accounting
could be different in order to move towards sustainability. This latter aspect is also
useful as background for discussions in Part III of the book.
Part III “Issues in accounting for sustainability” consists of five chapters which
each address a separate sustainability issue. Specifically, we discuss climate
(Chapter 9), water (Chapter 10), biodiversity (Chapter 11), human rights
(Chapter 12) and economic inequality (Chapter 13), respectively. While each
chapter’s structure is influenced by the nature of the topic, they generally follow a
similar structure. In each chapter we outline the issue that is the focus of the
chapter and consider why it is an issue for organisations and accounting more
specifically. We overview the key global, national and organisational level
institutions, frameworks and governance structures which influence each issue,
paying particular attention to those which relate to accounting and accountability.
Each of these issues has, to varying degrees, been addressed in accounting and
accountability practice. We discuss current practice in each of these areas and
consider the role of sustainability accounting and accountability, now and into the
future, in relation to these five sustainability issues.
It is important to recognise here that the five areas selected are not the only
sustainability related issues relevant for accounting and accountability. Indeed,
there are a myriad of other issues that could have been included here. We have
chosen issues that are either established or receiving increasing attention in the
sustainability accounting and accountability field – both in organisational practice
and academic research. In doing so we are conscious of the topics that have been
excluded. For example, accounting for other forms of inequality beyond economic
are an obvious exclusion. Gender, racial (in)equality, disability and LGBTQI+
issues are just some of the topics that are essential considerations for sustainability
accounting. In addition to these and other social issues, environmental issues such as
waste, energy and animal welfare/rights would appear to be some obvious
omissions. In presenting each issue separately, we also risk presenting them as
disconnected. We wish to highlight that these issues are all interconnected, so
while it is useful to consider each issue in turn, we should also be thinking about
the dependencies and interconnections between them. For example, as you will see
in Chapter 11 “Accounting for biodiversity”, one key factor in biodiversity loss is
climate change, the focus of Chapter 9. Likewise, climate change also has
relevance for other issues discussed such as water, human rights and economic
inequality. These interconnections will be noted in each of the chapters but are
worth reflecting on throughout the book.
While we are unable to cover all possible topics in this text, we would
encourage you to consider the relevance of sustainability accounting and
accountability to the range of sustainability-related issues as you engage with all
chapters of the book and the chapters in Part III in particular. For practitioners and
researchers in the area we would stress that there is as much of a need for further
knowledge and attention on the issues that do not appear in this book as there is on
issues that do. Common across all these topics – those that are usually the most
relevant and so are covered in this book, and those that are (knowingly and
unknowingly) absent – is that they all require further consideration from an
accounting and accountability perspective if we are to make the urgent transition
towards a more sustainable society.
 These reflections are carried through to Part IV “Conclusion” where we make,
in Chapter 14, some closing remarks. In this final chapter of the book we reflect on
some of the discussions presented. In particular we highlight how the book has
identified the challenges posed by sustainability to organisations and accounting.
While accounting can, and we would argue needs to, play a number of important
roles in the transition towards a more sustainable society, we reflect on how, to be
effective, this would require a fundamental change to a number of accounting and
accountability practices, going beyond the current state of practice and knowledge
presented in this book.

A note for instructors

This, the third edition of this title, is different in style and structure from the
previous versions. These changes are, in part, as a result of feedback in relation to
the desire for a textbook suitable for use in the now large number of courses on the
topic of sustainability accounting and accountability. So, while the book itself is
written to appeal to a broad audience, the book covers the range of topics you
might expect to find in an entry level course on the topic.
We have designed this book to be used at both undergraduate and postgraduate
level. This includes courses dedicated to the topic or where sustainability
accounting and accountability features as a topic within a broader course. Many
chapters include examples from the practitioner literature or practice which help
contextualise and ensure the text has practical relevance. These examples can be
used and followed up in preparing class materials and exercises alongside the
myriad of resources now available online. Where the book is being used for a
postgraduate course the instructor might like to consider supplementing the
chapters with academic readings. To assist with this, each chapter includes an inset
highlighting a research paper related to the topic as well as an additional reading
list along with the usual reference list.
The text has been structured in a way that an instructor can work through the
book in its entirety, for a long course, or focus on particular chapters to accommodate
a shorter course. For example, each chapter is suitable for an individual session
(one or two hours) on each topic. Chapters 5 and 6, both discussing
sustainability reporting, can either form the basis of two sessions, or can be
combined. While we would suggest Chapters 2 and 3 are useful for all courses on the
topic, some instructors might like to focus on topics in Part II, while others on the
range of issues presented in Part III. Any comments that readers and instructors
may have on the structure and content of this book are most welcome.

Conclusion
In this chapter we have introduced the focus and approach taken in this book. We
hope that readers find the material presented both useful and informative. It has
been written to introduce the topic of study, but also to encourage readers to
consider more broadly the potential and limits of accounting and accountability in
the transition to a more sustainable society. We hope you enjoy the material that
follows.
Note
1 We should note here the challenges related to the use of simplistic dichotomies, such as first world and
third world, industrial West and Global South, high-income and middle- and low-income countries, as
well as developed and developing countries. None of these are perfect, as they for instance signal the
primacy of particular areas (first world), emphasise path- dependency and the superiority of a specific
growth model (developed and developing countries), or just otherwise lump very different countries,
regions and cultures together (Global South). We nonetheless use such categories occasionally in this
book when we think it is relevant to point out significant global differences or otherwise highlight some
specific features that should be considered.