Sustainability Accounting and Reporting: An Ablative Reflexive Thematic Analysis of Climate Crisis via Conservative or Radical Reform Paradigms

Abstract

Despite the climate crisis, a significant barrier to sustainability is limitations to the current accounting and reporting system. These deficiencies, mean the global financial system continues to invest trillions of dollars annually in environmentally sub-optimal projects. To catalyze the economic transition away from fossil-fuel and plastic configurations to more sustainable ones, sustainability accounting and reporting (SAR) is imperative. However, theoretical contention, pragmatic concerns, and costs stoke strong resistance to SAR. The research used ablative thematic analysis to apply hermeneutic phenomenology. First, it scanned the backdrop to the SAR problem and identified a corpus of recent literature from key associated institutions. The initial interpretation of the texts disentangled SAR’s conflicting threads and generated three themes of ‘climate crisis’ and ‘conservative’ or more ‘radical’ SAR reform paradigms. Iteratively harnessing these thematic lenses, the investigation re-examined the SAR literature corpus. The textual ‘dialogue’ generated understanding of the fragmented SAR responses to the climate crisis. Accordingly, the research reformulated its first theme to ‘dystopic climate crisis fragmentation’ and refined the other themes to take account of materiality and the split between Anglo-Saxon (IFRS, SSAB) or global (UN) and continental European accounting institutions (EU, GRI). Conservatives retain a single materiality investor-focus and concede only incremental standard improvements. Radicals seek to implement double materiality with a broader spectrum of stakeholders in mind. Both approaches have theoretical as well as pragmatic advantages and disadvantages, so the SAR contention rumbles on. Whilst the standard-setting landscape is evolving, disagreements remain. Its roots of contention are philosophical and pragmatic. Philosophically, radicals strive to temper libertarian anarcho-capitalist proclivities and broaden firm responsibility. Pragmatically, social, or environmental externalities are problematic to assign or measure. Given vested interests in the destructive status quo, it would be naïve to expect a harmonious SAR Ithaca to emerge anytime soon. Yet the challenges impel an intensification of SAR dialogue and concrete actions. Rather than a scientifically nomothetic contribution, the paper provides a qualitative, artful interpretation of a complex, contentious but crucial field.

1. Introduction

1.1. Problem, Institutions, and Themes

In 2020, fossil fuels accounted for 83% of the world’s escalating energy use—projected to increase by 50% by 2050. Frankly, it seems unrealistic to suppose that humanity can manage the six-fold uplift in renewable energy necessary to transition out of fossil fuels by 2050 [1]), particularly since, currently, the private sector and global financial system send trillions of dollars towards destruction [2]. The ecological imposts of weak oversight and financial malignancy or shortcomings include excessive carbon emissions, airborne particulates, or widespread plastic pollution [3]. More insidiously, commercial intensification and the associated residential or agricultural extension fragment and deplete natural habitats, leading to poorly documented biodiversity loss and eventual species extinction [4]. Anthropogenic and industrial pressures accelerate emission-intensive property and construction activity, responsible for 38% of global energy-related CO₂ emissions [5] (p. 7). Within decades, climate change is projected to dent global GDP by 11–14% [6]. In 2021, Church intimated that, likely, by the end of this century, sea levels will rise by 1 m [7]. However, were all of Greenland’s ice sheet to melt, the rise could be as much as 7 m! Worryingly, we seem to be drifting towards this latter doomsday scenario, as illustrated by the seemingly inexorable increase in atmospheric CO₂ concentration (see Figure 1). Whilst in the 1970s, the annual increase in this GHG was 1 ppm; its trend currently is around 2.3 ppm per year [8] (p. V). From 2021 to 2022, global GHG emissions increased by 1.2 per cent. Currently, emissions are likely around 57.1–57.4 gigatons of CO₂ equivalent [9] (p. IV) [10] (p. XII).

At the economic level, GDP measurements, devoid of either environmental or social considerations, are depleted performance indicators and, notwithstanding government greenwash, poor indicators for conscientious green investors [11,12,13]. The climate crisis, plastic contamination of water sources, and air pollution impel urgent accounting systems reforms. At the firm level, one of the fundamental causes of the current environmental crisis is that capitalist accounting systems that underpin ‘performance’ ignore external costs [14,15]. Disproportionally, the poor bear external costs of industrial and commercial activities and, consequently, suffer from their detrimental health impacts as reflected by polarized incidence of chronic disease or mortality. Capitalist denigrators and skeptics vilify its waste, short-termism, and self-interested impulses. For these radical idealists, chasing a long-term, collectivist Ithaca, wise government interventions can overcome capitalist limitations to ensure climate justice. Mindful of autocracy, unintended intervention consequences, and system evolution, liberals or their more extremist anarcho-capitalists resist such collectivist utopian siren calls. Robert Nozick, who equates taxation with forced labor, would certainly begrudge any tightening of accounting regulations [16]. Egalitarians like Chomsky, on the other hand, castigate the ludicrous idea of ‘free contracts’ between gig-economy or other ‘potentates’ and their ‘starving’, rootless workforce [17]. This philosophical divide plagues accounting systems reform initiatives, splitting the profession. Free market liberals tend to be SAR conservatives who favor incremental accountancy reforms that protect investor interests. Radicals, on the other hand, tend to be egalitarians and favor triple bottom line accounting and reporting that integrates economic, social, and governance (ESG) considerations.

Figure 1. Change in atmospheric carbon dioxide [18] (p. 1).

Figure 1. Change in atmospheric carbon dioxide [18] (p. 1).

Global financial markets call for ‘high quality disclosures on climate and other sustainability issues’ because sustainability and climate change are the ‘defining issue of our time’ [19] (p. 1). If integrated with SAR, the fourth industrial revolution (Industry 4.0), involving real-time data collection, big data analytics, artificial intelligence, and cloud manufacturing, could help foster a more resilient, circular economy [20]. Paradoxically, though, in the short term, the strategic technological agility and substantial investments impelled by climate transition can dent relative profitability and deflate share prices [21].

Consequently, in addition to private commercial sector adjustments, the urgent climate change problem requires a blend of public sector resilience policies, transition infrastructure, and SAR reform. Market optimists like Cohen intimate that investors increasingly supplement assessments of risk and return with considerations of environmental impact [22]. Eventually, free markets will evolve and drive capital towards optimal solutions, especially if prodded by more eco-friendly accounting frameworks. Market optimists have faith in technological and financial evolution to solve the climate and other environmental crises. Keynes was more skeptical about market solutions, considering that ‘the vast majority of those who are concerned with the buying and selling of securities know almost nothing whatever about what they are doing’ [23] (VII, pp. 360–361). Despite media salience of the climate crisis, fossil fuel use grows inexorably, exposing greenwash and undermining confidence in the current corporate reporting system. In fact, fossil fuel production plans entail that by 2030 the world will consume more than twice the amount of fossil fuels than is consistent with limiting warming to 1.5 °C [24]. To address this market failure and internalize the carbon externality, UNEP and others favor carbon pricing. The consumer at the petrol pump or paying utility bills will protest. Consumer resistance aside, conceptually, G in ESG is a process, not an outcome. Beyond that, it is unfeasible to measure downstream CHG (scope 3). Instead, Kaplan proposes to use ABC for inventory accounting for upstream supply to allocate emissions to products with the possibility of offset for E-liability reporting [25].

1.2. SAR Institutions and Issues

However, the sustainable accounting field is contested, disordered, and fragmented. Heterogeneous companies confront multiple competing CSR frameworks with inconsistent sustainability metrics [26]. Kaplan [25] describes the current sustainable accounting scene as an ‘alphabet soup’ encompassing acronyms like ESG, CSR, etc. Figure 2 illustrates some of the institutions in the fragmented SAR landscape that divide into market liberals with a conservative view on standards and the opposing radical camps.

1.3. Reform Challenges

Notwithstanding rhetoric such as build back better, green economy, and net zero, the world seems addicted to fossil fuels. The question is whether all the green slogans are merely hubris or, in the inimitable works of Greta Thunberg, ‘blah blah blah’ [27]. Global emissions are NOT decreasing (see Figure 1), so we appear on track for global warming of around 2.4 °C rather than the ‘golden calf’, so to speak, of 1.5 °C. In fact, UNEP indicates that current projections of fossil-fuel use to 2030 are more than double (110%) the level needed to prevent a breach of the 1.5 °C threshold and even exceed by 45% fossil fuel usage compatible with a 2 °C temperature rise aspiration [8]. The issue is obviously serious—a fact reinforced by some alarming curiosities. For example, since 1850, over 500 glaciers have disappeared in Switzerland, according to Matthias Huss, a glaciologist at the ETH technical university in Zurich [28]. Despite the worrying signals, vested interests, populism, neoliberal ideology, subsidies, and substantive development challenges have, to date, conspired to foil meaningful cuts to GHG emissions [29]. Substantive blockages include India and China’s coal-based production, misaligned tax systems and debilitating fossil fuel subsidies that COP 26 failed to extirpate, including the USD 700 bn of annual subsidies paid by the 50 largest food producing countries towards very destructive land uses [2]. Notwithstanding belated, hubristic claims of the financial sector at COP26 (so-called Glasgow Financial Alliance for Net Zero—GFANZ), the challenges remain daunting [30]. Firms need to grow beyond ‘virtue signaling’. Surely, part of the climate change solution must involve principal-based SAR so that firms systematically record and return independently assured reports on their environmental impacts?

2. Materials and Methods

The research operationalized hermeneutic phenomenology using ablative, reflexive thematic analysis (ARTA)—a parsimonious approach to interpret relevant texts without formal coding [31]. In a recent article, Braun and Clarke warn against Thematic Reflexive Analysis incongruence by adopting procedural (checklist) quality practices [32]. Rather than worrying about subjectivity it must be managed. Ablation (Latin: ablātĭo) facilitates the conceptualization of themes as patterns of subjective meaning central to a qualitative approach. Ablation involved an initial scanning of the SAR backdrop to identify key players in the field and generate a tightly focused corpus of their recent SAR documentation. Procedurally, the investigation followed the sequence, illustrated in Figure 3. First, the research reviewed the SAR backdrop to identify key global players engaged in the SAR debate or practice. Among the entities fulfilling these criteria were the United Nations Environment Programmes (UNEP, UNEP-FI), EU, GRI, SASB, and IFRS. From these institutions, this study sourced recent literature (reports, public documents, academic articles, published reports, and brochures or web pages)—the SAR corpus. The research adopted Maxwell’s pragmatic literature approach and employed a ‘tools’ rather than ‘foundation’ metaphor to isolate relevant SAR sources [33]. To isolate papers with a ‘thematic fit’, marginal texts with peripheral narratives were progressively removed from the retained corpus to leave a manageable sample of relatively recent (>2020) published works [34] (p. 99).

The research then scanned the distilled corpus, seeking to disentangle its conflicting threads and establish some coherence between opposing narratives. The researcher subjectivity anchored the ARTA approach which is not a scientifically descriptive but rather an ‘artfully interpretative’ and situated reflexive process [36].

3. Results

In a creative and active process, simplification, questioning and corpus hermeneutic phenomenological textual analysis (subjective reflection and interpretation) generated three initial SAR themes: climate crisis, conservative, or radical SAR reform [31,37,38]. Subsequently, the research used the initial themes as a ‘lens’ to critically re-examine the SAR corpus. Further thematic refinement involved immanent critique to establish substantive meaning of underlying narrative structures. It probed beneath the linguistic surface of documents to eliminate verbosities and identify contradictions or paradox, only vaguely perceptible at manifest (latent) level [31,34,39,40]. After iterative analysis, the research reformulated or refined the themes to dystopic climate crisis fragmentation, conservative single materiality, or radical double materiality paradigms. The reflection and synthesis of the secondary evidence corpus concluded that the current accounting system is unfit for purpose and needs to incorporate SAR. Attempts to rationalize the institutional landscape have stalled, and harmonization remains some way off. The argument over the best approach rumbles on.

Refinements to the second and third themes emphasize materiality divergence between conservatives (with a single materiality investor focus) and radicals (with a double materiality perspective that incorporates wider ecological and social considerations). The IFRS-F-backed ISSB curates the minimalist Anglo-Saxon SAR conservative camp. It consolidates the single materiality SAR paradigm by incorporating VRF, SASB, and the IIRC. Radical SAR reformers seek to integrate a range of ecological metrics into financial returns. The global and continental SAR grouping includes the UNDSA, UNEP-FI, EU-C, and the GRI. These frameworks or standards cater to a broad spectrum of stakeholders and seek to incorporate the impact of firm externalities, including biodiversity, water abstraction, and pollution [15,41].

3.1. Theme 1: Climate Crisis

Climate change manifests meteorologically, agriculturally, infectiously, or demographically. Geographic instability unsettles the political economy and disturbs financial markets and valuations [41]. Social systems struggle to absorb the influx of climate refugees, stoking political polarization. While scientific solutions involve pricing carbon to restrict fossil fuel use and extraction, the political cost of implementing rational transition measures hinders their implementation. More broadly, the crisis highlights the inherent contradictions within capitalism. The dynamic engine of short-term profits can engender deception, social alienation, and environmental destruction. Central to any substantive reforms to address climate change is a credible accounting system that provides a digestible and impartial measure of responsible performance. However, for decades according to Pitt-Watson at the Centre for Accounting Research Education (CARE), the accounting profession has, to put it mildly, dragged its feet on sustainability accounting and reporting (SAR) and is now belatedly scrambling to salvage its diminished credibility [42]. However, Pitt-Wilson advocates for investors or at least has them in his focus. He discretely evades the key issue dogging financial statements legitimacy—that of an investor-focused single materiality perspective that is out of kilter with the 21st century climate and environmental situation [42].

Ironically, major investors now drive the impetus for SAR change. BlackRock (BR) the world’s largest asset manager with USD 9 trillion in assets under management, wants all companies to disclose their transition to net-zero plans. In 2024, BR voted against 69 companies and against 64 directors for climate-related reasons and put 191 companies on watch. Net zero means asset owners need to eliminate or offset emissions with a combination of low carbon replacements, energy efficiency improvements, and negative emissions and every firm’s or public and third sector entity’s business model will be impacted dramatically. Once objectives, barriers, and constraints are recognized, a measurement system should assess agent performance to properly account for key variables in conflicting fields of capital allocation, emissions reductions, and profitability. Accountability requires that agents measure and report the right things that principals then act on. Measurement for measurement’s sake, without consequences, is illusory. It is the appearance of accountability but is really noise not signal, or worse, greenwash. For market actors to trust self-reported emissions or other environmental data, it must be collected using agreed objective methodologies AND then independently verified.

Manuel Rodriguez Becerra, the distinguished Columbian environmentalist, is skeptical that we will grow beyond the distracting illusion of small-scale forestry projects when big banks are investing billions in extraction activities, including mining, dams, beef, etc. [43]. Notwithstanding promises by global banking giants and investment firms to divest from polluting energy companies, they continue to bankroll projects that drive the climate crisis [43]. Large food and farming corporations continue to cut down carbon-storing forests and spew greenhouse gas emissions into the atmosphere. However, such agricultural investments are largely unnoticed and unchecked. According to Bruno Sarda, a former North America president of CDP, agricultural development represents a potentially catastrophic climate change blind spot. For him, animal protein and dairy are the biggest source of emissions and the new ‘oil and gas’.

Feix and Philippe analyzed institutional CSR narratives and found little mention of divergence between business firms’ financial goals and societal interests (also known as paradox) [26]. In addition, to avoid discussion on the salient paradox of noncongruence between corporate profit objectives and societal needs, these authors found taboos involving multinational firms’ continued contribution to global socio-environmental issues and CSR’s moderate results in solving these problems. Instead, corporate narratives (spin) depict an antagonism-free and depoliticized world which is essentially marked by unity in destiny, shared values, and common interests. It seems, rather than the comfortable neoliberal fairytale of contested markets spontaneously ‘magicking up’ benign outcomes, consumers often confront an unseemly string of privatized monopoly ‘organized rip-offs’ [44] (p. 1).

The re-examination of the SAR corpus using critical reflection on the first climate crisis theme reformulated it as dystopic climate crisis fragmentation as the disparate accounting bodies, first, ignored SAR for decades then scrambled to generate a plethora of disparate responses. Now, a tardive consolidation effort under the auspices of IFRS-F is in the offing.

3.2. Theme 2: Conservative Approach

The thrust of the UK- and US-based accountancy institutions’ approach to SAR involves, at least initially, single materiality, but the FRC is consulting on potentially more robust financial reports and investment labels to reflect direct and indirect environmental impacts and align with EU’s SFDR [45].

3.2.1. Financial Reporting Council

The Financial Reporting Council (FRC) is UK’s current commercial regulator of corporate governance, reporting, and audit. In the wake of Carillion’s collapse and the Patisserie Valerie imbroglio, heralded audit shakeup and replacement of the FRC by the Audit Reporting and Governance Authority (ARGA) stalled. In 2019, the FRC pointed to systemic environmental deficiencies in company governance and reporting. The G7 Impact Taskforce (ITF) notes that the global economic systems must alter so that environmental and social factors influence capital allocation to facilitate an inclusive transition towards sustainability [46]. To date, corporate boards have largely eschewed their environmental responsibilities because of outdated governance frameworks and a tendency to ‘tick the box’ rather than ‘open the can of worms’ inherent in true and fair override (TFO) [47] (p. 19). Firms need to, urgently, strengthen resilience reporting and update their accounting systems to better reflect direct and indirect environmental impacts [48]. Specifically, the FRC found scope for improvements in Non-Financial Disclosures (NFDs) and greenhouse gas (GHG) emissions reporting [49]. Often, NFD were omitted or vague. Only 46% of companies credibly articulated their climate change impacts but only 29% described impacts associated with their supply chains. The FRC expects non-financial reporting to address impacts associated with suppliers and customers. Often, the scope and basis of GHG emission reports are vague and ignore downstream customer lifecycle product usage carbon emissions. But should a car company account for the carbon emitted by drivers of its vehicles? The Financial Conduct Authority (FCA) encourages companies to use the Task Force on Climate-Related Financial Disclosures (TCFDs) and SASB frameworks. From 1 January 2021, FRC insists that UK premium listed companies must provide TCFDs on a comply or explain basis, but it is considering expanding reporting requirement to all listed entities [45].

3.2.2. IFRS Foundation (London)

In 2001, the IFRS Foundation launched as a platform to provide global investors transparent and comparable information [50]. A total of 140 jurisdictions accepted the Accounting Standards promulgated by its International Accounting Standards Board (IASB). In 2020, pressure by government and international investors for high-quality, transparent, reliable, and comparable information on climate and other environmental, social, and governance (ESG) matters pushed the Foundation to consult publicly with UK regulatory authorities and government departments. The results suggested a high demand for IFRS-sponsored international sustainability reporting standards. The IFRS’s credibility, established governance structures, and due process support the quick rollout of new sustainability standards. On 3 November 2021 at COP26 in Glasgow, the Foundation launched the International Sustainability Standards Board (ISSB) to develop Sustainability Disclosure Standards (SDS) and sustainability reporting ones. IFRS oversight facilitates connectivity between financial and non-financial reporting. The Foundation’s Technical Readiness Working Group (TRWG) has developed a suite of standards for release by 2022. For guidance, the TRWG intends to leverage existing frameworks such as the Sustainability Accounting Standards Board (SASB), Task Force on Climate-Related Financial Disclosures (TCFD), and Climate Disclosure Standards Board (CDSB). The ISSB intends to consolidate SASB and the International Integrated Reporting Framework (IIRC) into the Value Reporting Foundation (VRF).

However, contentions remain, notably in scoping the standards. A pre-requisite for any sustainability standards is the determination of key stakeholders. The Foundation argues that the ISSB should, at least initially, focus on the information needs of investors but ‘reporting could better explain how climate-related issues are systematically integrated into the investment process’ and ‘Investors increasingly expect information on climate-related issues to be reflected in the financial statements and auditors to challenge and test management’s assumptions’ [48] (p. 12). Effectively, for the time being anyway, the Anglo-Saxon accounting setting establishment wants to kick the can of wider stakeholder interests into the long grass. This pragmatic scope restriction nevertheless limits the ISSB’s environmental credibility.

3.2.3. International Sustainability Standards Board ISSB

The IFRS-F argues for single materiality sustainability so financial statements only disclose sustainability information material to enterprise financial value creation, preservation, or erosion. The problem here is that, for large multinationals, the deleterious impacts of many remote corporate activities, although globally immaterial financially may be biologically, culturally, socially, or locally highly significant. Even if any inflicted local impacts are negligible at a point in time, cumulative activities can become noxious (the obvious example here is ubiquitous plastic packaging). The IFRS argues that the alternative, double-materiality approach substantially increases standard setting task complexity and diverges from IASB practice. So, the Foundation recommends the ISSB adopt an incremental approach and initially focuses on investor-relevant sustainability information. Eventually, the sustainability standards might evolve towards a more comprehensive assessment of the risks and opportunities, entailed by double materiality. Extension to consider EU Non-Financial Reporting Directive (NFRD) would avoid global standard jurisdictional fragmentation, but the ISSB will need to set narrative reporting sustainability boundaries. Here, the use of the ESG acronym, although widely used, does present the ISSB with a governance conundrum. In addition to the alignment with other bodies and general conventions, it is important to ensure that the standards are proportionate to stakeholder needs without becoming an onerous regulatory burden.

3.2.4. Value Reporting Foundation (VRF)

In June 2021, the IIRC merged with the Sustainability Accounting Standards Board (SASB) to form the Value Reporting Foundation (VRF). By June 2022, VRF will consolidate into the new ISSB, overseen by the IFRS Foundation.IQ.

3.2.5. The International Integrated Reporting Council (IIRC)

In 2010, the International Integrated Reporting Committee morphed into the International Integrated Reporting Council (IIRC). It is a global coalition of regulators, investors, companies, standard setters, the accounting profession, and NGOs that seeks to enhance accountability and stewardship for financial, manufactured, intellectual, human, social, and natural capitals. It supports integrated thinking and balanced decision-making that considers interdependencies between various forms of capital. For example, exclusive focus on financial capital could lead to overemphasis on profit but erode human capital through ill-considered, short-term human resource policies or practices.

3.2.6. Sustainability Accounting Standards Board (SASB)—San Francisco

In the United States, the SASB develops and disseminates sustainability accounting standards that help public corporations disclose material, decision-useful information to investors Their market-based SAR paradigm involves three related entities (CDSB, SASB, and TCFD) that report climate-related risks. A jointly authored report by the SASB and CDSB ([51], p. iii) notes that effective disclosure of climate-related risks helps mitigate mispricing risk and so stabilizes markets. SASB standards recognize the need for consistent, comparable, and reliable disclosure of financially material, decision-useful environmental, social, and governance (ESG) information for investors. SASB standards are single materiality industry-specific and prioritizes the needs of investors rather than a broader range of stakeholders. The SASB curates sector-specific sustainability Key Performance Indicators (KPIs) aligned to the CDSB Framework’s principles for reporting environmental information. Despite the narrow sustainability focus of SASB, entities who apply SASB standards with the TCFD recommendations should relatively easily engage with IFRS S1 (disclosure of material information about climate-related risks and opportunities) and IFRS S2 (industry-specific disclosure) [52].

3.2.7. Task Force on Climate-Related Financial Disclosures (TCFDs)

In 2015, the Financial Stability Board (FSB) in the US instigated the Task Force on Climate-Related Financial Disclosures (TCFDs) to develop consistent climate-related financial risk information for investors. Cognizant of the climate risk, the UK has signaled that it intends to make TCFD-aligned disclosures mandatory by 2025. The impetus is to avoid asset mispricing and eventual market instability by effective disclosure of climate-related risks. The TCFD consulted with the CDSB and the SASB and integrated their recommendations into its climate disclosure standards. The UNEP FI’s TCFD program has incorporated much of TCFD learning into its new climate stress testing guidance.

The conclusion for second conservative SAR reform theme is that Anglo-American institutions and programs favor a single materiality perspective, focused on the financial interests of investors.

3.3. Theme 3: Radical Perspectives

3.3.1. United Nations

The current global capitalist and conventional financial reporting systems can mask significant firm external impacts [53]. The United Nations has three initiatives to help temper short-sight commercial proclivities that damage the environment. First, it promulgates Sustainable Development Goals (SDGs) that reflect broad public aspirations for the integrated consideration of environmental, social, and economic impacts when assessing development projects such as dams. The SDGs helped frame the UN’s second major sustainability policy lever—accounting system reforms to plug information deficiencies [54].

The SDGs doubtless helped frame the gestation of the United Nations et al. (2021)’s System of Environmental Economic Accounting-Ecosystem Accounting (SEEA-EA) that provides a statistical framework for organizing habitat and landscape data, measuring ecosystem services and assets, and linking this information to anthropogenic activity. The proposed dynamic perspective exceeds conventional boundaries of entity-responsibilities and integrates interdisciplinary expertise to capture spatially or temporally dispersed impacts. The SEEA-EA integrates economic, environmental, and social data into a single, coherent framework for holistic decision-making and so addresses criticism of the IFRS approach e.g., raised by Cho [55].

The United Nations Environment Programme Finance Initiative (UNEP FI) is the third sustainability reform initiative of the international body. As its name suggests, UNEP FI is a global partnership between the United Nations Environment Programme (UNEP) and the financial sector [56]. Over 190 institutions, including banks, insurers and fund managers, work with UNEP to understand the impacts of environmental and social considerations on financial performance. Through its Climate Change Working Group (CCWG), it ostensibly promotes greener finance decisions by disseminating the use of non-financial scientific information to supplement market, credit, or operational risk assessments. Although the UNEP FI has double materiality pretentions, its focus remains a conventional, single materiality, financial one.

3.3.2. European Union Commission

Today, many organizations tend to prioritize financial materiality. This narrow approach is detrimental to sustainable development but, ultimately, also to their bottom line. In this fog of opacity, investors or civil society stakeholders can misjudge investment risks. The consequent resource misallocation opens an accountability gap between companies and society. To re-balance priorities, the EU promulgated the Corporate Sustainability Reporting Directive (CSRD) and Non-Financial Reporting Directive (NFRD). To address perceived information deficiency, certain large EU companies must now report on social, employee and environmental matters, human rights, bribery, and corruption. EFRAG provides Technical Advice to the European Commission, drafts European Sustainability Reporting Standards (ESRS), and, where there is disagreement, liaises with the IFRS.

The NFRD aims to build a reporting consensus that helps navigate the current ‘somewhat bewildering landscape of overlapping reporting standards and frameworks (see Figure 2). Like the GRI Standards and the UN’s SEEA-EA, the CSRD adopts a double materiality stakeholder perspective so that large firms internalize negative production externalities and account for their impacts [57]. However, rather than a regulatory compliance ‘red tape’ that undermines business competitiveness and fosters ‘green fatigue’, CSRD should drive strategic business transformation [58]. The first step is to have robust governance so that dispersed, deleterious impacts, risks, or opportunities are identified and reported. EU law requires certain large companies to disclose information on the way they operate and manage social and environmental challenges. This helps investors, civil society organizations, consumers, policy makers and other stakeholders to evaluate the non-financial performance of large companies and encourages these companies to develop a responsible approach to business. Directive 2014/95/EU Directive 2014/95/EU—also called the Non-Financial Reporting Directive (NFRD)—lays down the rules on disclosure of non-financial and diversity information by certain large companies. This directive amends the Accounting Directive 2013/34/EU.

On 21 April 2021, the European Commission issued their proposed changes to strengthen the nature and extent of sustainability reporting in the EU over the coming years (CSRD). The proposed changes to sustainability reporting are profound and will be fundamental and directly support the European Commission’s stated objective of directing investment towards more sustainable activities across the European Union. The CSRD proposals significantly enhance the scope of the existing NFRD rules to cover all large undertakings as well as all those listed on EU regulated markets, except for micro-entities. NFRD has a double materiality perspective acknowledging how financial materiality can differ from social and environmental materiality. Moreover, in contrast to the NFRD, the CRSD sets out in far greater detail the non-financial information that entities should report. As expected, the CSRD introduces mandated EU sustainability standards to be prepared by the European Financial Reporting Advisory Group (EFRAG) and adopted via secondary legislation. The standards should be based on the recent recommendations recently made by the EFRAG Task Force on Non-Financial Reporting Standards (TFNFRS), with a first set of standards due for adoption by 31 October 2022.

3.3.3. Global Reporting Initiative (GRI)

GRI, the Global Reporting Initiative, is an international independent standards organization that facilitates the evaluation and communication of entity impacts. Founded in 1997, the GRI (Global Reporting Initiative) is an independent, international non-profit institution, located in Amsterdam with branches in Brazil (2007), China (2009), India (2010), USA (2011), South Africa (2013), Colombia (2014), and Singapore (2019). It promulgates the oldest and most widely adopted sustainability reporting guidelines and standards (GRI, 2021) that enables responsible companies to communicate their significant impacts in a structured and transparent way to a range of stakeholders [59]. In contrast with the IFRS, GRI uses a ‘two-pillar reporting structure, with financial and sustainability disclosures on an equal footing’. While the IFRS focus is investors, GRI and EFRAG seek stronger harmonization of the SAR landscape for the benefit investors and society [60] (p. 1).

In 2000, GRI published its first guidelines (G1) but regularly updates them (versions G2–G4 by 2013). In 2016, GRI promulgated its first set of standards, predicated on entities identifying (GRI 1) and prioritizing their impacts on the economy, environment, and people. The first standard clarifies critical concepts, explains how to use the standards, and specifies the principles—such as accuracy, balance, and verifiability. Entities use a situational analysis to frame their context, identify then assess the impacts of routine activities. GRI 2 specifies disclosures in detail about different aspects of an organization’s activities. GRI 3 explains step-by-step how to identify and assess impacts and their significance and includes a list of material topics. The GRI standards involve double materiality so that wider social, environmental, and economic impacts supplement investor ones, as illustrated in Figure 4 below.

3.3.4. B Corp or Better Corporations

B Lab, founded in 2006, aims to catalyze economic transformation. Rather than the GRI’s reporting frameworks, B Corp Impact Assessment (BIA) or simply ‘B Corp’ designation generates an overall entity performance score. B Lab claims its BIA is a rigorous, comprehensive, credible, and comparable impact standard that meets ‘high standards of verified performance, accountability, and transparency’. The B Impact Assessment (BIA) supports economic system change. It is touted as ‘holistic’ rather than exclusively focused on a single social or environmental issue. Critiques question its integrity and point to ‘cherry picking’, lack of independent scrutiny when scoring an entity’s overall impact on its employees, communities, or the environment. A systematic literature review found B Corp can foster Corporate Social Responsibility (CSR) [61]. Unlike the Global Reporting Initiative (GRI), the focus of a BIA is actual performance rather than the standardized reporting of non-financial information. Poponi et al. intimate that B Corp certification might raise awareness and stakeholder engagement with the circular economy [62].

The research retained its third theme but refined and extended it to radical double materiality. The three UN initiatives, the European Commission sustainability reporting directives, GRI standards, and B Corp certification help rebalance accounting materiality towards integrated sustainable considerations.

4. Discussion

After two hundred years of unprecedented economic and population growth, capitalism faces its nemesis unless it evolves into a more responsible production mode. Yet global institutions struggle to tackle the problem effectively. Trillions of dollars still flow in the wrong direction, many corporate monopolies seem embroiled in questionable practices, fossil fuel extraction continues unabated, carbon dioxide levels inexorably rise, and wider imposts of unseemly corporate activity continue to accumulate in damaged or depleted ecosystems. Trustworthy, integrated, verifiable, and comparable accounting information is urgently needed to hold directors to account. A key element in any credible energy transition and program is reforms to the accounting system. However, the research found a contested landscape of multiple sustainability reporting guidelines that hinders comparability. Specific reporting standards for different industries need further development. In the face of prospective severe climatic-induced disruption or insidious pollution, the current ‘alphabet soup’ of accounting and reporting systems seem, frankly, unfit for 21st-century purposes [63]. Yet the effort to integrate sustainability accounting provides a ‘direction of travel’ so to speak beyond ‘green washing’ because it makes ethical claims about capital. Currently, however, reporting regulations in many countries limit disclosure to a single-materiality framework that, effectively, suppresses a more nuanced performance evaluation. By ignoring emissions and other environmental impacts, climate-aligned investment is systematically diminished. In a tempestuous political world with powerful vested interests at play, capital is often misallocated towards nefarious rather than more beneficial activities. Unfortunately, capital markets can discount stocks of firms who invest to reduce their environmental impact compared to their less conscientious peers as illustrated by the recent (2024) relatively poor performance of British Petroleum compared to Shell.

The research acknowledges several limitations. First, it would benefit from richer and more transparent hermeneutics (textual interpretation) with reflections spanning philosophy, language, history, and practical accounting case studies. Second, a more structured literature review might generate either reliable global standards for sustainability accounting or at least some axioms or hypotheses needed for them. Future research might extend the literature review and achieve this nomothetic objective although at the cost of interpretive heterogeneity. Despite its limitations, the SAR research intimates the need for reforms that must involve, first, mandating stronger minimum standards and, shortly afterwards, providing more non-financial information to a wider spectrum of stakeholders. Currently, the SAR community seems split into two camps. Conservatives seem to be shuffling the deckchairs on the Titanic so to speak. They may have some legitimate concerns about excessive bureaucratic and regulatory constraints and want to proceed prudently by initially developing standards that reflect enterprise value before extending the SAR remit to social or environmental considerations. Grudgingly, conservative players now recognize that the direction of travel is towards double materiality but advocate for an incremental pathway. Judicial evolution, including the new crime of ecocide, may yet concentrate minds and spur reform.

SAR radicals, on the other hand, seek to immediately and explicitly recognize and incorporate non-financial impacts for a broad spectrum of stakeholders into company reports. Double materiality impact indicators could extend to, for example, fossil fuel usage, carbon emissions, plastic content, or other pollution externalities. Likely, the cumulative impact of such reforms would be substantial although difficult to model because the outcome of regulatory negotiations and the extent of enforcement are unknown. Perhaps, the spate of recent SAR reforms and institutional rationalizations suggest that the fragmented and contested SAR landscape is slowly evolving towards global double materiality harmonization, underpinned by integrity and inclusive, interoperable data? It is perhaps somewhat fanciful to hope that some corporate vested interests will not obfuscate and delay meaningful reporting reform. At worst, delays, deception, or maskirovka (маскирoвка) enable culprits to continue to plunder the earth, pocket ill-gotten short-term private gains. Ideally, meaningful dialogue and appropriately calibrated SAR reforms should illuminate the darkness or as Baudelaire puts it, déchirer des ténèbres. Plus denses que la poix, sans matin et sans soir, Sans astres, sans éclairs funèbres (tearing the darkness. Denser than pitch, without morning and evening, without stars, without funeral flashes) [64].

5. Conclusions

Given climate change, pollution, and anthropogenic intensification, the current accounting frameworks need reform. Sustainability accounting and reporting (SAR) re-calibrates the accounting information field to shine a spotlight on poor practice by irresponsible entities and encourage sustainable investments. SAR, therefore, highlights the inherent contradictions within capitalism and tempers its worst depredations. The research applied ablative reflexive thematic analysis to operationalize phenomenological hermeneutics (the personal interpretation of texts). It identified the key global players in the accounting profession and a corpus of recent relevant literature. An initial scan of the corpus generated three themes involving climate crisis, conservative response, or radical SAR approaches. Using these three lenses, the research critically re-examined the literature to probe for latent meaning beneath linguistic surface. Reflection on the first climate crisis theme led to its reformulation as dystopic climate crisis fragmentation in a somewhat baffling SAR landscape with a plethora of activity signaling tensions and, perhaps, contradictions within capitalism. Nevertheless, the SAR landscape evolves. In 2023, IFRS Sustainability Disclosure Standards, developed by ISSB, requires entities to disclose material information about sustainability-related risks and opportunities. Despite agreement between reporting bodies on the need for SAR standards, opposing conservative single-materiality and radical double-materiality paradigms remain. Although a simplification, conservatives reluctantly acquiesce to gradual reforms with limited environmental disclosures. The so-called radicals advocate for broader sustainability accounting standards. Given anarcho-capitalist antipathy to collectivist utopian siren calls and the vested interests of the accounting profession to maintain the lucrative status quo, it would be naïve to expect a harmonious SAR Ithaca to emerge anytime soon. Yet climatic and pollution challenges impel an intensification of SAR dialogue and concrete actions. This paper’s contribution is its artful interpretation that helps stakeholders navigate a complex, contentious but crucial field.