The FT has reported that:
Pension schemes in the UK are to be forced to explain how millions of their members' retirement pots will be affected by rising temperatures under new government measures as part of a response to climate change.
On Wednesday, the government will announce plans to “step up” existing requirements on pension schemes managing tens of billions of pounds of retirement cash to disclose what they are doing to manage climate risks for their savers.
With the greatest of respect to the government, this is a meaningless objective. Not a single UK company in which those pension funds invests does, as yet, account for climate change on their balance sheet. Most do not follow the Task Force on Climate-related Financial Disclosures, which are inadequate because they are voluntary, do not require on-balance sheet disclosure of the costs of climate change to a company and ignore Scope 3 emissions, which has the result that an airport can claim to be carn neutral because it can ignore the emissions of the airlines that use it.
So, unless the government also backs sustainable cost accounting, which is the only proposal there currently is to put the cost of climate change on company's balance sheets, pension funds cannot deliver what is demanded of them.
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And don’t tell me, for a small fee you can provide it!! …except many academics and practitioners are way ahead of you and are far better resourced and equipped to provide this information. I know that i presume you do to?
As far as anyone can tell I am one of only two people even trying to achieve this goal, and I’d suggest I’m ahead
Please feel free to tell me if I am wrong who the 9thers might be
I’ll be pleased to know
The Global Reporting Initiative has been producing ESG standards since the late 90s.
This in itself suggests that you aren’t one of “only two people trying to achieve this goal” and you are at least 25 years behind them.
Having had a look through your so-called “sustainable cost accounting”, I can see very little detail as to how it actually works. You have no metrics or analysis as to how C02 production would actually be measured, accounted for and the cost of such. After all, if a company is to be made to account for the C02 it produces ON THE BALANCE SHEET then there has to be a cost associated with it.
Moreover, I happen to think that your claims that costing C02 are unnecessary for SCA is simply you finding the problem of accounting and costing C02 too difficult, thus making a spurious claim that doing so isn’t required.
I also find the idea that a company should account for all C02 upstream and downstream (i.e. not within the boundaries of its own business) quite laughable. If nothing else it will lead to severe double counting, amongst other problems.
As such, it strikes me that John Richards is absolutely correct in his assessment of your aims. You have no experience or background in ESG accounting, being just a basic tax accountant, and it looks like you are short of work, money or both and are scratching around with a hastily churned out idea solely such that you hope someone will once again fund your witterings.
GRI is not doing on the balance sheet ESG. No one is….
And actually, the ICAEW think that the precise quality of what I am suggesting is carbon (and other GHGs, because this is not just a carbon issue) need not be priced and that the matrix I have developed is entirely about costs under the company’s control, and not imposed on them.
They’re interested enough to hold a whole seminar on it
But what the heck? Your real goals are clear from the final para
Are you a professor at three universities? No? I didn’t think so either. Nor is any ‘basic tax accountant’
So I suggest you go off and play in troll land
If you had bothered to understand the subject, rather than just pushing out nonsense with a view to getting someone to fund you (because clearly your 3 professorships don’t) then you would KNOW that ESG is already incorporated into the balance sheet.
Directly via book value/impairment, but also via opex, op costs and op margin. Company valuations are also typically discounted by terminal and beta discount adjustments – which can be directly caused by ESG attributions.
GRI, UNPRI and various other organizations already have rules, regulations and guidlines as to how to treat ESG ON THE BALANCE SHEET.
But surely, one as knowledgeable as a professor of 3 universities would know this. Surely?
But then again, you are a Professor of PRACTICE at City, and I’m guessing the other universities you are a “professor” at is much the same. No academic qualifications required.
But the crux of the matter is still that your SCA is just verbiage. There is no hard analysis of how to implement it and your “matrix” I am sure is just more of the same. It is also utterly and totally ridiculous to suggest that any company should be responsible for the C02 production of its entire supply chain. By your rules essentially every company on the planet would near enough instantly become insolvent. It is simply not realistic.
And do you deny that you are trying to get funding for such work, which will be paid to you in grant form as a salary, which you will probably then not be taxed on?
Well if I missed that so has the Institute of Chartered Accountants in England and Wales
Except they did not miss any of that because none of those standards require balance sheet provisions. No ESG standard does.
Nor does the IASB
Or the Australian Accounting Standards Board
So with the greatest of respect, you’re very simply wrong.
As you are on responsibility for Scope 3. The whole point of discussing climate change is to make those responsible for it accept their duty to account for externalities. And if that makes them insolvent, so be it.
And what is the big problem with me earning a living from doing research? Since when did such a thing become a sin? And why?
But the real issue here is your claim is that I am not taxed, when I am, and always have been on all I earn. What you actually reveal is that you are simply a troll coming here from Tim Worstyall’s far-right web site intent on causing trouble
Please don’t call again because it very obvious you have not a clue what you are talking about. I am delighted to engage with debate, but not with those simply trolling who cannot get any of their facts right
I’ve just read through SCA (from one of your earlier blogs on the topic) and am at a loss to see what data it actually provides?
You don’t go into any detail about how Carbon produced should be measured, or how it should be costed on the balance sheet. You just jump straight in to saying that if a company produces net Carbon and can’t get itself to zero (within some unspecified time frame) it should be made insolvent.
You then make it even more impossible by saying companies aren’t allowed to offset carbon and that they have to account for their whole supply chain.
Maybe it would be more easy to understand if you gave us a simple example?
Let’s take Tax Research UK. What is it’s Carbon footprint and what effect does that have on the balance sheet of the business?
If you have no clue what it says then you are out on your own, because companies clearly do know how to measure their emissions and clearly can work out how to eliminate them. GHG standards specify this: I don’t. They have been around for a long time. I am not reinventing any wheel here.
They can also do scope 3, although they admit it is harder.
So start there.
All I am saying is they have to account for the cost of removing this GHG emission. It’s really not hard.
And it is exceptionally unlikely that this standard would apply to anything but large companies. TRUK is not one of them.
Alternatively, I strongly suspect that you
I have no clue what it says because it is inconsistent, illogical and at times just plain factually incorrect.
For starters, you aren’t putting Carbon emissions on the balance sheet at all. To do that you would have to measure and price them, giving a monetary cost.
What you are doing instead is just creating a totally separate balance.
“All I am saying is they have to account for the cost of removing this GHG emission. It’s really not hard.”
QED. Even you say they have to account for the cost of removing GHG emissions – but then say the cost of those emissions don’t matter – which is wholly inconsistent.
You then say that balance can’t be offset (which is illogical) and that the whole supply chain should be included (also illogical, because you are inevitably going to double count). THen you go on to say if the balance of GHG emissions are positive the company is “carbon insolvent” without specifying any regimes as to how that would actually work. Are they to instantly shut down? IS there some sort of time frame they must become Carbon neutral? You are just making things up as you go along.
I’m not surprised people are asking various questions about your SCA, because it looks very much like you haven’t spent any real effort in thinking thing through, or done any real research. Which is why I asked you to illustrate with the example of Tax Research UK.
Let us ignore for the moment that it is a small company, and that you claim they would probably be exempt. Let us also ignore your obvious attempt to avoid answering the question.
So, for the sake of example, what are TRUK’s emissions (because I assume it has some, and is not carbon neutral), and what effect would it have on it’s balance sheet?
It should be a very easy answer given your expert status, having created SCA and being the owner of TRUK one would expect you to know the details for your own company.
I am putting the impact of climate emissions on the balance sheet
And at the corporate level that is what matters: all carbon prices will always be artificial, after all
As for Scope 3, it’s an interesting argument that a company has no responsibility for what it produces. Actually, it’s simply not what happens for any known product so contrary to all known legal pracrice. I will do a blog on this very soon
As for carbon insolvency – it is quite clear that winding up is required by the end of the transition period
In other words everything you claim is already answered….
And so let’s look at TRUK
It’s Scope 1 emissions are almost all from air transport: I am seeking to eliminate them. The cost of doing so is negligible and will be reflected in greater travelling time on rail
And those can be mitigated by the use of video conferencing. I did that this week. But no provision is required in that case
Re Scope 2, the electricity I buy is from a renewable supplier.
I have to eliminate gas heating. I could provide, say, a small part of the cost of that for the house. Shall we say £500?
And Scope 3 -I guess I may be responsible for tiny quantities of electricity consumption by readers of this blog. I will stop blogging before the transition period ends.
Next?
“I am putting the impact of climate emissions on the balance sheet”
Just saying you’ve done it doesn’t mean you actually have. SCA provides no framework for the actual cost of these emissions on the balance sheet itself. All you have done is create a line item *totally separate* from the balance sheet which is little more than a total tall y of how much Carbon and company produces. If positive, wind up the company.
“As for carbon insolvency — it is quite clear that winding up is required by the end of the transition period”
And that transition period is? You provide zero detail on these rather important points.
“And so let’s look at TRUK”
Yes, lets.
“It’s Scope 1 emissions….”
Not withstanding that rail travel also prodcues C02, TRUK is not carbon neutral.
“mitigated by the use of video conferencing”
Again, not Carbon neutral. Even if much lower than actually travelling in person, you are still using power and thus producing C02.
“Re Scope 2, the electricity I buy is from a renewable supplier.”
OK. But is that supplier carbon neutral, or just renewable? Because given your claim that you have to take into account your whole supply chain – in this case your electricity provider – you hve to take into account their emissions as well. And the emissions of the their suppliers, etc. Windmills and solar panels take an awful lot of energy (and thus C02) to produce).
“I have to eliminate gas heating. I could provide, say, a small part of the cost of that for the house. Shall we say £500?”
So here once again your inconsistency shines through. On the one hand, you say that you don’t need to actually put a cost on the carbon you are producing (yet you do here) and on the other, you say you can’t offset emissions.
“And Scope 3 -I guess I may be responsible for tiny quantities of electricity consumption by readers of this blog.”
But you are saying that you have to take into account your Scope 3 emissions. How big are they? If you can’t take it into account then you get to the position you have taken, which is basically saying that it is too complicated to work out therefore you won’t bother, and will just stop doing it. Hardly a sensible way forward for most businesses and indeed the world economy as a whole.
it is also very noticeable that you have had to guess at TRUKs GHG position. You haven’t been able to make any definitive or accurate assessment of how much carbon it actually produces, or how much it would cost to eliminate them. Likewise, even with “mitigation” TRUk will still (almost inevitably) be carbon positive, not least because you are unable – by your own rules – to offset any carbon emissions.
By that logic, TRUK would be deemed carbon insolvent and should be wound up.
Do you start to understand why your SCA rules are so nonsensical?
As a side note – you might want to look at the GHG Protocol. They’ve been doing what you claim to be the only one doing for about 20 years. They have spent huge resources and man-hours working on these issues and problems, with a very large team of researchers and contributors. I’m not sure how you think you, as a one man band in your front room think your back of envelope SCA is superior to their work.
But why not ask them.
You really do miss the point, don’t you?
I can buy zero carbon energy.
In due course I hope rail will be zero carbon too.
I hope to eliminate the flying.
The net cost of these actions will be about zero to me. So there is no provision to make.
And I could provide the cost of the boiler.
So I have a sustainable cost accounting plan
And TRUK is not insolvent
It has rather more than £500 in the bank right now
You are, then, simply wrong. And the exercise shows the rules make complete sense – so long as I make the changes
And you even miss the point that I am using the GHG protocols – but of course, they never made them a financial accounting issue, and I have
But most amusing is that you think a liability on the balance sheet is not on the balance sheet
I suggest you troll elsewhere Roger – you clearly have not a clue what you are talking about
I think your answer is deliberately missing the issues with SCA. I think you know what they are but are too stubborn or arrogant to admit that you have made a rather large mistake.
TRUK itself, as a stanalone entity can indeed be near enough zero carbon – though you don’t actually have a way of determining that exactly, you are just guessing.
But that is missing the point.
Your SCA rules mean that TRUK CAN’T be treated as a standalone entity. You yourself state that Scope 1,2 AND 3 emissions have to be accounted for.
Yet suddenly you are not doing it for TRUK – because firstly you don’t know what they are, and secondly, there is absolutely no way TRUK could offset them.
You might be using renewable energy, but have you accounted for the carbon produced in that supply chain? The building of the wind farms etc? You might use trains more, but they are not carbon neutral at all, and building railways certainly isn’t. What about the people reading your blog? Just producing the copper needed for the cables they use in their PCs and power supplies is highly carbon intensive, let alone the power used.
If you, as you claim, have to account for everything a company is doing, all the way up and down the supply chain, then you can’t suddenly go back to viewing TRUK in isolation. Which is exactly what you have done when it suited you to.
Which is the point various people have been trying to make on this blog. You are not being consistent. The rules make no sense not least because you are NOT being consistent. On the one hand you are saying TRUK will be carbon neutral, but are ignoring it’s supply chain and end users, but then state other companies will have to account for their ENTIRE supply chain.
Is that clear enough for you?
And no, SCA doesn’t make this a financial accounting issue. To do that you would have to be able to value the liability. You make no attempt to do this. As I say, and I reckon this is on purpose as a shortcut to simplify a difficult problem (which you don’t have the patience or understanding to really work through) all you have done is create a separate, NON-FINANCIAL line item which is just the amount of net carbon produced.
Which is exactly what the GHG protocols already do, in a very comprehensive fashion.
You are hardly the first to tackle this problem. So much so there is already a regulator for sustainability accounting. There has been for quite a while now.
First, I value the liability. That is precisely what SCA does. And I did it for you for TRUK
And second, TRUK is not carbon neutral now. I know it. So I, like all businesses, need a plan to be so. That’s what SCA demands.
I outlined a plan.
So SCA works.
And for the record, the SASB is not a regulator.
And it does not do one the balance sheet accounting
What more can I say but that all your claims are wrong, as a matter of fact, because they are?
So, what’s your motivation Rodger? And who are you, really?
You haven’t valued the liability. You have sort of guessed at it, and even then mostly just claimed there isn’t one by saying you can “mitigate”.
Even with your “mitigation” TRUK will not be carbon neutral, so surely you should be following your own rules and winding it up?
Don’t you see how inconsistent you are being here? On one hand you claim you don’t need to price the carbon being produced but then on the other you are saying you HAVE valued the liability.
For a company to be declared insolvent, don’t you think it is rather important to know to a relatively high degree of accuracy what that liability is?
You have also TOTALLY avoided the main point I was making. You have looked at TRUK in isolation, but elsewhere are saying companies are liable for their entire scope 1,2 and 3 emissions.
In the TRUK example, this would make TRUK liable for all the inputs it uses (which include not only the energy it uses directly, but also the energy used to create that infrastructure) and all the carbon produced by it’s “customers”.
Which you haven’t done at all.
So in practice, you claim SCA “works”, but when we test it with a given example, you can’t show us how it works because:
a) you don’t know how much carbon TRUK produces
b) you don’t have a price for that carbon
c) you don’t know how much your scope 1 emissions are
d) you don’t know how much your scope 3 emissions are
e) you choose to change the SCA rules on an ad hoc basis to ignore most of scope 1 and all of scope 3.
Pretty damming if the inventor of SCA can’t even apply it with any real intent or accuracy to his own, very simple business.
I am starting to think you are a Walter Mitty type character. You just make claims you are correct and everyone else is wrong, despite very simple on obvious errors being pointed out to you. You avoid answering difficult questions, and you habitually change the subject. You make claims that “you are the only person doing this” when quite clearly there are various serious groups, with hundreds and thousands of highly qualified people working on the problem – where your only qualification is in basic tax accounting. Unless I am greatly mistaken you have no prior knowledge or experience of any environmental or ESG treatment of accounting.
In fact, the Corporate Accountability Network (of which this SCA seems to fall under) seems not to have touched anything to do with environmental accounting until around the time Extinction Rebellion started to make the news.
So, a mand with no knowledge, experience or qualifications in the subject suddenly creates a “new” accounting “standard” and tries to promote it, when the subject is in vogue, with the explicit aim of acquiring funding.
And you wonder, with how rushed, weak, ill-defined and inconsistent SCA is, and you obviously trying to find someone to pay you, despite there being much better informed and qualified people to ALREADY working on the subject, why some people think you are just trying to jump on the bandwagon to squeeze out a payday for yourself.
Let’s be clear Rodger what this is all about is this:
So, a mand with no knowledge, experience or qualifications in the subject suddenly creates a “new” accounting “standard” and tries to promote it, when the subject is in vogue, with the explicit aim of acquiring funding.
And very oddly, that’s a theme that only seems to come from a group of right-wing trolls, all of whom seem to be influenced by Tim Worstall
I have answered the actual questions and for the record:
a) I have been involved with green issues since the 1980s
b) I am the only person currently on the planet to have seen an accounting standard they created move to be the law in 90 countries
c) I am not the slightest bit embarrassed by asking for research funding and the idea that I should be seems remarkably strange, but extraordinarily consistent amngst a very uniform group of commentators
So it’s time to stop this stupidity on your part.
And as for the state of knowledge, it’s odd that many leading fund managers and the Institute of Chartered Accountants in England and Wales are now discussing this with me because they want to know, but apparently they’re all asking the wrong person
They don’t think so, but form behind your veil of secrecy as a troll you do.
Richard you sound like a fraud and react like a child, why should you be taken seriously?
Oddly, only those from the far right seem to think this
Maybe you’re very worried I might be right?
Indeed, that I am right?
And I’d politely point out it’;s you and your friends doing the childish name calling: I’m tackling the issues
I read the aim of SCA not to be direct costing of the carbon footprint of a company, but to identify the origins of the carbon footprint of the company and attach a cost to the actions required to (ultimately) reduce carbon emissions to 0.
In this way the carbon doesn’t have a monetary price, because actually all that is required is that carbon = 0.
Forgive my naivety, but why must everything be measured with money? It is not always the correct metric.
That is the language of financial decision making
And businesses that accept manage net balamvced cash flow do not survive
Accepted on the cash flow statement.
Maybe I should have asked:
Why, when the goal is obviously not to determine cash solvency, is a cash price still being attached to carbon output? Is it just habit that means everything is viewed via cash cost?
p.s. I appreciate that cash is a handy universal measure for most tasks, but in this context it gives the impression that those with lots of money can just buy out of their carbon output commitments — which is wholly wrong. If greenhouse gas output cannot be reduced to or close to 0, then the activity must stop.
The goal is to determine cash solvency – has the company the ability to pay to become net carbon neutral
This is all about financial reporting
And this is not about the rich buying out, it’s about business having to transform