Accounting and financial reporting currently penalizes businesses investing in net zero strategies
Berlin, May, 27th 2021 – The current system of corporate reporting needs to be overhauled if the world is to attain climate goals, according to a panel on the constraints of accounting at the Global Solutions Summit.
A business’s chief executive wanting to implement a net zero strategy today is likely to be dissuaded by the chief financial officer due to the impact on the company’s share price, said Robert McGarvey, co-founder of the think tank Rethinking Capital, which champions the incorporation of intangible assets to help modernize accounting.
“We have a situation where doing the right thing, investing heavily in net zero transition is penalized … and on the other hand doing nothing or doing the minimum possible is rewarded,” McGarvey said, adding that in this way, “accounting is aligned against climate action and I believe against public interest.”
Instead, accounting should measure intangible assets such as how companies contribute to social wellbeing and environmental sustainability, according to the panelists.
“We need to find a better method of recognizing intangibles,” said Susanne Stormer, head of sustainability at PwC Denmark, highlighting the need for “better instruments to actually identify what is the hidden value in an organization and how can we bring that to the table.”
By Sophie Wingate, on behalf of the Global Solutions Initiative
Notes to the Editors
The Global Solutions Summit 2021 will take a hybrid virtual and in-person format due to the Corona pandemic this year. In the studio, which will be set up in-house at the Berlin European School of Management Technology (ESMT), participants from all over the world will be connected with moderators and speakers who will attend in person from the studio. A digital platform will allow all participants not only to follow the presentations and discussions, but also to exchange ideas with other attendees. “The appeal of the physical Summit has always been the ability to meet face-to-face with many like-minded people. It is exceedingly important to us that much of this can also take place in the digital space,” stresses Dennis J. Snower.
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The Global Solutions Initiative is a global collaborative enterprise that proposes policy responses to major global problems, addressed by the G20, the G7 and other global governance fora. The policy recommendations and strategic visions are generated through a disciplined research program by leading research organizations, elaborated in policy dialogues between researchers, policymakers, business leaders and civil society representatives.