Financial accounting can be harnessed as the engine of sustainability transition

Financial accounting:- Traditionally, companies have focused on assessing and reducing their climate impacts, i.e. their carbon footprint. M.Sc.(Econ.) Sami El Geneidy developed in his doctoral research at University of Jyväskylä, Finland, a new tool for assessing the biodiversity footprint of companies. However, El Geneidy claims that carbon and biodiversity footprint accounting alone is not enough, but financial accounting must be harnessed as the engine of the sustainability transition.

Climate change and biodiversity loss are deteriorating the foundations of good life on Earth. Traditionally, these two crises threatening our society have been examined in their own silos. Sami El Geneidy developed in his doctoral research the calculation of both carbon and biodiversity footprints and ways to reduce the footprints in organizations. Based on previous research, El Geneidy developed a metric, the biodiversity equivalent, that organizations around the world can use to calculate and compare their biodiversity footprints.

- Stopping climate change and biodiversity loss requires significant changes in our society. Organizations such as companies, public institutions and associations are the basic pillars of our society. Climate change and biodiversity loss must be solved at the same time in organizations to embrace synergies and avoid tradeoffs, El Geneidy explains.

However, according to the study, carbon and biodiversity footprints should be used more widely in the planning of financial control mechanisms. El Geneidy shows that, for example, carbon and biodiversity offsetting can be used to place a financial value on the carbon and biodiversity footprints. Organizations' carbon and biodiversity footprints can result in significant financial consequences when they have to be offset. In addition to offsetting, financial value can be placed on the carbon and biodiversity footprints through various tax and subsidy schemes.

- Financial accounting sets the boundaries within which organizations operate and define, for example, its profit and loss. Combining carbon and biodiversity footprints with financial accounting could lead to the redefinition of those frameworks so that organizations work in favor of the sustainability transition and not against it, El Geneidy adds. AlphaGalileo/SP