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First generation CO2 Accountants
First generation CO2 Accountants
19 februari 2021

International interest for Dutch CO2 accountants

There is international interest in how Avans University of Applied Sciences delivers accountants who know how to set up CO2 accounting. That is why there is now an English version of the P + Special that describes the first batch of graduated specialists. A new year of Avans accountancy students has now set their teeth in another ambitious graduation assignment: how to measure circularity in the building construction sector. Until now, a good calculation model is missing. Next week a P + Special about this issue explores the role of clients.

This English version of the P+ Special ‘First Generation of CO2 Accountants’ tackles questions as: How much CO2 does a dairy cow produce? Is it the same as a bull raised for slaughter? And how much CO2 should a caterer who sells this beef include in its annual report? Reporting on these issues is even complex for frontrunners in sustainability. There is just no structured CO2 accounting available.

There is a huge gap between people who are responsible for the finances of an organisation and those who design the sustainability policy. This even applies to companies with high marks in the Transparency benchmark of the Dutch Ministry of Economic Affairs and Climate. Every year, we see that companies largely delegate the reporting on non-financial information to sustainability and communication professionals, without the in-house accountants calculating or checking any of the data.

Two recent studies underline this fact. Karen Maas and Marjelle Vermeulen of the Impact Centre Erasmus advised the Netherlands Environmental Assessment Agency (PBL) to establish a new benchmark; one that does not award the highest level of transparency, but instead provides actual insight into a company's non-financial performance. 

The second study shows a shift in focus. The Dutch Authority for the Financial Markets (AFM) specifically looked at compliance with the new European guideline that compels organisations of public administration to report on non-financial information. After all, the government cannot fall behind. What are, in fact, the results of its sustainable political policy? 

Both studies show that organisations perform well when accounting for their strategy and policy, and that they are happy to share some great stories in this regard. But reporting on concrete goals and how they are or will be achieved is falling significantly short. This makes it difficult to assess whether companies have actually increased their sustainability. They lack the skills needed to quantify their performance and the impact of their efforts. 

The lectorate Sustainable Finance and Accounting from Avans University of Applied Sciences sees the cause for this lacking in the poor setup of organisations' sustainable accounting. As a result, the integrated report, that combines the financial figures and sustainability report, is insufficient as well. During their studies, students in Finance & Control and Accountancy learn that a company should excel in four activities: Focus (strategy and policy), Setup (ensuring a proper management information system), Performance (activities) and Information (reporting). Based on these pillars, the students found many shortcomings when studying the quality of the non-financial and sustainability performance and integrated reporting in the management information system (MIS). The solution lies in broadening the knowledge of the financial professionals involved. What information do they need for setting up an MIS that also assesses other types of capital (Intellectual, Human, Social and Natural)? This would make it possible to establish a dedicated balance sheet and profit and loss account for these capitals too. And it would give a company better insight into the activities that create or result in a loss of value.

This is all easier said than done. It takes a tremendous amount of work to put it into practice. Nonetheless, Avans University of Applied Sciences aims to provide future financial professionals with the knowledge and skills to better understand and report on this type of information, allowing management to better steer the company towards sustainability and value creation. 

So, where to start this substantial task? Of all the non-financial information, what most urgently demands accounting at this time in order to contribute to a sustainable strategy? Avans University of Applied Sciences chose reporting on CO2 emissions based on various reasons. The urgency of the climate problem is one of them. The need for companies to better address this issue and thus actually reduce emissions is a given. But there's also the fact that CO2 is clearly defined, and the Greenhouse Gas Protocol already has clear guidelines on how an organisation should link its CO2 emissions to its various activities. 

But despite the classification of CO2 emissions via Scope 1, Scope 2 and Scope 3 (CO2 emissions classified by emission source), it was a challenge for the students to properly map companies' CO2 footprints. This was partly due to the type of company they focused on. In addition to their own University of Applied Sciences, this includeed the CO2 accounting of caterers Albron and Hütten, supplier Dalco, wholesalers' Sligro and beer brewery Swinkels. These five companies in the agri-food sector have a relatively modest level of direct CO2emissions like energy consumption for production and own transport, but quite a large footprint based on indirect CO2 emissions from products they purchase from other companies: especially with regard to dairy and meat products. This is indicated as category Scope 3 and it was this dimension of carbon accounting that the students found most complex. Because how can you determine the CO2 emissions of a specific ingredient? Can we trust the fact that the CO2 production of one kilogram of meat is realistic, or is it just a general figure that we've agreed on? A figure that can be bought from a specialised agency? And does the average figure apply when you purchase your ingredients from the most sustainable butcher you can find? 

In their research, the students soon discovered that 'their companies' did not have a structured or up-to-date accounting for CO2. It didn't come as a surprise. Research into the major accounting firms has shown that even the frontrunners in sustainability struggle with a proper Management Information System  (MIS) for CO2. Various parties have developed software to process non-financial information such as CO2 in accounting, but they still face the issue of whether granting a CO2 value is actually realistic. The students worked with information provided by Milieu Centraal and other Dutch platforms that calculate how much CO2 is emitted on a flight to Barcelona for consumers. Or how much CO2 a container of strawberries contains. They are also developing advanced databases based on Life Cycle Analyses (LCAs) of various products, down to the ingredient level. 

The Carbon Accounting graduate atelier, as Avans dubbed this first generation of CO2 accountants, has brought the participating companies many new insights. During the presentation at the Verkade plant in Den Bosch, they all indicated that they would be utilising the students' findings. The graduate atelier also confirmed an important insight for the lectorate: CO2 reporting is not that dissimilar to ordinary financial accounting. 

The industry will be needing this and next generation of young financial professionals with their corporate and structured perspective on information collection and processing in the field of sustainability. Europe is implementing increasingly better legislation. Moreover, end users are increasingly asking about the CO2 footprint of individual products. This means that fields of study such as Finance & Control and Accountancy must start including more sustainability in their curriculum. Because if there is one thing we've learned from the COVID-19 crisis, it is that non-financial events can have major financial consequences. 

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