The Transition Movement discussion

This topic is for the discussion of chapter 13, Corporate Reporting and Externalities.

First, I'm going to advertise a short essay that I'll be writing up on something that has bugged me about the book we're reading. Over and over again, the authors mention various types of "capital" in these chapters, without really defining what it is they're talking about.

Now in some cases I can guess, and apparently the authors feel that "oh everyone knows what human capital is" (yes, "people" ... but is that the end of this concept?), or "everyone knows what social capital is" (uh, no, I don't).

The book itself lists none of these types of capital in the index, nor does it even list "capital" in the index. So I'm going to work on this at least for my own understanding, will probably put it together in my GR "writing" area, and then post a link or two to that here in Transition.

I think this is important, because so much of what is being talked about in this book is economic in nature, and unless the phrases about different types of capital really have a solid meaning to a reader as they pass before her eyes, I'm pretty sure (certainly speaking for myself) the reader is not really getting it.

Now for a comment about the chapter itself.

As usual, I found information about several hopeful developments in the subject area.

To briefly summarize what the chapter is about, prior essays in the book have talked about the way that our modern capitalist economy has conveniently disregarded "externalities" from the market price of goods and services, from the financial reports of corporations, and from the way that we as consumers generally think about the things we buy.

(In an era of global warming, the most egregious of these disregarded externalities is of course greenhouse gases, released as "waste" whenever we burn fossil fuels.)

This chapter talks about several initiatives that have begun in the past few years to address one of the more consequential ways in which externalities have been pushed out of the discussion - the ignoring of them by corporations in both their financial reporting and in their long term planning.

The author starts off (154) by relating how, in the mid-1990s, the Prince of Wales initiated the Accounting for Sustainability (A4S) project in the United Kingdom: "A4S proposed that reporting regimes integrate strategy, governance, and financial performance into the social, environmental, and economic contexts of a company."; and mentions how this project has been built on in numerous ways by official international groups.

Okay, I’m getting entirely too wordy here, it will take me forever at this rate. Back to the page number and brief descriptions of the author’s point which I’ve been using the last couple weeks.

156 – The example of BPA (Bisphenol A), which was first reported to have adverse effects in 1931, but wasn’t declared a toxic substance until 2010 (only in Canada even then). “Transparent corporate reporting would have notified all involved that a risk existed.”

156 – The global value of externalities was estimated in 2008 as $7 trillion – 11 per cent of the global economy

157 – Recent initiatives by GAAP (Generally Accepted Accounting Principles) and IFRS (International Financial Reporting Standards) have not addressed externalities; nor are these bodies, responsible for financial reporting, likely to do so soon.

157 – But in 2010 the SEC (Securities and Exchange Commission) issued guidance on how climate change risk should be addressed under existing reporting standards.

157 – Voluntary standards such as CSR (Corporate Responsibility Reports) have gained some traction, but have (not surprisingly) been used by some companies to mislead intentionally.

157-8 GRI (the Global Reporting Initiative) has become “the gold standard” for CSR reporting. Yet still companies can exclude ”vast portions” of their sustainability impacts from CSR reporting and achieve a “high” GRI reporting standard.

158 – After the Deepwater Horizon spill in the Gulf, BP showed, in their CSR metrics two years later, that the system could still be gamed “to the point of absurdity”.

158-9 The “integrated report” proposed by the IIRC (International Integrated Reporting Council) is the most promising to date; it specifically mentions the disclosure of externalities in this type of corporate report.

159-160 The SASB (Sustainability Accounting Standards Board, a U.S. non–profit) is establishing sustainability standards that can be used in integrated reporting.

160 – In summary, the author says “More than at any other time in history, the value of reporting externalities is being recognized as a critical part of corporate reporting.” He mentions that some 80 companies were piloting the IIRC’s integrated reporting, as of December 2012. (A partial list of companies participating (only those that agreed to allow their names to be publicized) can be found at http://www.theiirc.org/companies-and-... .)

So, a mixed bag of positive and negative items, with perhaps the former outweighing the latter. The real question it seems to me, is not only “How fast will something like this catch on, and be mandated?”, but also “How amenable to “gaming” will the rules and standards eventually set forth, be?” For if standards like these can be gamed they will be, to whatever extent a corporation deems it useful. For a corporation, lying and misrepresentation is always an option.